Short answer: a development is usually funded in three layers — bank loan, EB-5 money and developer equity. If problems arise, repayment follows that order: the bank first, EB-5 next and the developer last. The higher EB-5 sits, the lower the risk.
A typical capital stack
| Layer | Usual source | Repayment order | Risk |
|---|---|---|---|
| Senior loan | Bank | First | Lowest |
| Mezzanine / subordinated loan | Many EB-5 projects | Second | Medium |
| Preferred equity | Some EB-5 projects | Third | Higher |
| Common equity | Developer | Last | Highest |
Three key ratios
- EB-5 share of total cost: too high means over-reliance on EB-5.
- Developer equity share: the more the developer puts in, the better aligned they are.
- Loan-to-value: the lower total debt including EB-5 is against the project’s value, the bigger the cushion.
Questions to ask
- Which layer is the EB-5 money in, and is it secured?
- Is the bank loan already committed?
- How much has the developer already invested?
- Who covers any cost overrun?
Our advice
Project marketing tends to stress location and the developer’s name, but the capital stack says more about risk. Ask for a clear capital stack table. Read more: loan vs equity projects and how to vet an EB-5 project.
General information only, not investment advice.