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[HOT] [Q] Can a third-party guarantee a NCE's loan to a job-creating entity for a RC EB-5 project?


[Q] At the October 19, 2009, AILA EB-5 conference in San Francisco, CSC officials indicated that an acceptable EB-5 investment in a regional center context may consist of an equity investment in a commercial enterprise that in turn makes a loan with the invested capital to a borrower. CSC officials also appeared to state at the conference that the commercial enterprise could receive a guarantee from a third party that the borrower would repay the borrowed funds to the commercial enterprise. Please confirm that this is acceptable. It should be, since even a third party may not be able to pay the guarantee (e.g., AIG). Similarly, the borrower may not be able to repay the commercial enterprise, even if it receives money from the third party (e.g., General Motors). Also, does it matter whether the third party guarantor is a private insurer, bonding company, or a government entity?

Let's see what USCIS says clearly on this issue, and then our comment.

Yes, there is currently nothing in the statute or regulations to preclude the guarantee from the third party as long as the alien investor’s capital is still “at risk”, and the arrangement does not constitute a redemption agreement or a guaranteed buy-back arrangement for the alien investor’s investment in the commercial enterprise. A determination as to whether a specific third party guarantee is contrary to the statutory and regulatory requirements has to be made on a case-by-case basis.

Actually, whenever USCIS says there is "nothing in the statute or regulations", they can go either way. In other words, USCIS could have prohibited such arrangement based on the same rationale that there is "nothing in the statutes or regulations" which specifically permit such arrangement. Actually, USCIS should have held that where such third-party guarantee falls within the "standard commercial practice", it is permissible.