How EB-5 Escrow Is Changing

It’s wasn’t very long ago (maybe 5 or so years) that traditional EB-5 escrow accounts were the standard method of releasing EB-5 investor funding into developer projects in the U.S.

This method worked fine initially, taking only 6 months for the USCIS to process traditional EB-5 escrow. However, in more recent years, the USCIS has had increasingly longer processing times, sometimes taking as long as 18 months to process. The new standard time is 12-18 months, which is problematic for EB-5 investors whose developers want to the funding faster.

EB-5 agents and investors have decided that traditional EB-5 escrow is no longer feasible for their timelines.

This has lead to EB-5 agents and investors looking into alternative forms of escrow.

Three alternative forms of EB-5 escrow include “early release escrow”, “holdback escrow” and “full release escrow.”

Early Release Escrow

An EB-5 investor must have an exemplar I-526 project pre-approval or one or more I-526 petitions approved or both for their funds to be released into a project. The downside of the early release escrow is that the I-526 exemplar petition may take 12-18 for the USCIS to approve. A solution to this is to get the I-526 exemplar petition approved before the project is marketed to investors. This form of escrow is highly favored by agents.

Holdback Escrow

The holdback escrow releases the majority (nearly 80%) of the EB-5 investors funds into the project upon filing of the I-526 petition. That means that 20% of the funds are held back until the petition is approved. This is based off the premise that 20% of petitions will be denied. This is the quickest form of escrow.

Full Release Escrow

A full release escrow is available to EB-5 investors who fund projects of credible developers. This form of escrow usually needs a guarantee from the developer stating that they will return the investors capital, within a certain timeframe, if the I-526 is denied. Agents are increasingly favoring the holdback escrow and the full release escrow as they are faster methods of releasing funds and agents are generally compensated for their work when the funds are released.

 

EB-5 investors should choose the type of escrow that has the level of protection they’re comfortable with.