Short answer: most EB-5 regional center projects use a loan model: investors join an EB-5 fund (the new commercial enterprise), which lends to the project company and is repaid at maturity. In an equity model, the fund owns part of the project, and getting money back depends on a sale or refinancing.
The two compared
| Loan model | Equity model | |
|---|---|---|
| Use of funds | Lent to the project company | An ownership stake |
| Repayment | Under the loan terms | Sale, refinancing or another exit |
| Protection | Collateral, guarantees, repayment priority | Depends on the shareholder agreement |
| Return | Usually a low fixed interest rate | Depends on performance |
| Exit timing | Easier to predict | Harder to predict |
Loan projects: what to check
- Collateral: is the loan secured on project assets?
- Priority: does the EB-5 loan rank behind or alongside bank debt?
- Repayment source: sales, rental income or refinancing.
- Guarantees: completion or repayment guarantees from the developer.
Equity projects: what to check
- Whether the valuation is reasonable.
- The exit mechanism and timeline.
- EB-5 investors’ decision rights.
What both share
Either way, the capital must be at risk and is not guaranteed back. USCIS approval does not mean the project will succeed. See when EB-5 capital comes back and how to vet an EB-5 project.
General information only, not investment advice.