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<\/p>\nThe word \u201cloan\u201d sounds safer than \u201cequity\u201d \u2014 but it is where you rank in the repayment order that determines when you get repaid, and whether you get repaid at all.<\/p>\n
Not all loans are equally secured. This article helps you see where your capital sits in the EB-5 capital stack \u2014 and what actually protects it.<\/p>\n
6-minute read \u00b7 Updated June 2026<\/p>\n
Listen to the podcast \u00b7 Read the full article<\/p>\n
<\/p>\n
Episode 05<\/p>\n
The Hidden Side of EB-5<\/p>\n
05:21<\/p>\n
Loan<\/p>\n
The most common model \u2014 capital goes into the NCE, which then lends it on to the project company<\/p>\n
Unsecured<\/p>\n
The loan to worry about \u2014 no collateral securing it<\/p>\n
10%<\/p>\n
Developer equity at around this level is not recommended<\/p>\n
Bank<\/p>\n
Bank participation is a positive signal \u2014 the project has been through independent, rigorous due diligence<\/p>\n
01 \u00b7 Definition<\/p>\n
It is the way all of a project’s sources of funding are ranked by repayment priority when the project ends or its assets have to be liquidated. Think of the cash flow as a queue: whoever holds collateral stands at the front and is repaid first; loans with no collateral behind them stand at the very back.<\/p>\n
02 \u00b7 The repayment queue<\/p>\n
Front of the queue<\/p>\n
The party holding collateral<\/p>\n
Usually a bank \u2014 repaid first<\/p>\n
Your position<\/p>\n
In the middle<\/p>\n
EB-5 capital<\/p>\n
Repaid later; its place depends on whether it is secured by collateral<\/p>\n
Back of the queue<\/p>\n
Unsecured loan<\/p>\n
No collateral \u2014 the highest risk if the project fails<\/p>\n
03 \u00b7 Secured or not<\/p>\n
Both are called \u201cloans,\u201d but one is backed by specific assets the lender can enforce against, while the other rests on nothing more than a promissory note. The difference is what protects you if the project fails.<\/p>\n
Criteria<\/p>\n
Secured by collateral<\/p>\n
Unsecured (no collateral)<\/p>\n
Security<\/p>\n
Specific assets (e.g., real estate)<\/p>\n
Only a promissory note<\/p>\n
If the project fails<\/p>\n
A basis to enforce against the collateral and recover funds<\/p>\n
Little realistic prospect of recovery<\/p>\n
Order of repayment<\/p>\n
Ahead in line<\/p>\n
Last in line<\/p>\n
\u201c<\/p>\n
Better to choose an equity structure with clear commitments and a property title or other real assets we can enforce against if needed, than a loan in name only, with nothing in hand to secure it.<\/p>\n
Thomas Lee \u00b7 Southeast Regional Center (SRC)<\/p>\n
04 \u00b7 Quick take<\/p>\n
The right questions to ask<\/p>\n
What secures my EB-5 capital \u2014 actual real estate, a developer’s commitment, or just words?<\/p>\n
Where does the project get the money to repay me at the end?<\/p>\n
What is the developer’s equity share \u2014 is it too low (around 10%)?<\/p>\n
Is a bank involved in the project, and has the project undergone independent due diligence?<\/p>\n
Pitfalls to avoid<\/p>\n
Don’t let the word \u201cloan\u201d cloud your judgment \u2014 dig into how the capital is actually structured.<\/p>\n
Don’t be reassured by the word \u201cloan\u201d alone \u2014 it may turn out to be an unsecured loan.<\/p>\n
Don’t look only at the total capitalization without breaking it down into developer equity, bank debt, and EB-5 capital.<\/p>\n
Don’t get swept up by polished renderings and skip the thick stack of legal documents.<\/p>\n
Don’t stop at the word \u201cloan\u201d<\/p>\n
When investing in EB-5, ask: where does my money sit in the repayment queue, what secures it, and where will repayment come from when the project ends?<\/p>\n
Part 02<\/p>\n
In-depth article<\/p>\n
U.S. investment migration \u00b7 EB-5<\/p>\n
In many EB-5 project marketing materials, the word \u201cloan\u201d is presented as safer than an equity investment. That is partly true \u2014 but the full picture is far more complex, and it comes down to where the EB-5 capital sits in the project’s capital stack.<\/p>\n
Most EB-5 projects today use a loan model<\/strong>. Some projects use an equity model, but that structure is generally riskier. In the regional center loan model, investors transfer funds into a New Commercial Enterprise (NCE)<\/strong> \u2014 the entity that holds the capital \u2014 and the NCE then lends the money to the project company.<\/p>\n The advantage of this structure is that the NCE can require the project company to provide collateral<\/strong> or a guarantee for the loan.<\/p>\n Many investors researching a project ask just one question \u2014 \u201cIs this a loan or an equity investment?\u201d \u2014 and relax as soon as they hear \u201cloan.\u201d But caution is warranted: some projects marketed as loans are in fact unsecured loans<\/strong>, with no collateral at all behind them. If the project fails, the lender holding that promissory note may have little or nothing to recover.<\/p>\n \u201cBetter to choose an equity structure with clear commitments and a property title or other real assets we can enforce against if needed, than a loan in name only, with nothing in hand to secure it.\u201d \u2014 Thomas Lee, Southeast Regional Center (SRC)<\/p>\n In a project, cash flow works like a queue ordered by priority. Those holding collateral stand at the front and are repaid first; loans with no collateral behind them stand at the very back. So don’t let the word \u201cloan\u201d cloud your judgment \u2014 find out what actually protects your money: actual real estate, a developer’s commitment, or just words? The reality is far more complex than the label suggests, and this is where investors need genuine due diligence specialists.<\/p>\n Criteria<\/p>\n Secured by collateral<\/p>\n Unsecured (no collateral)<\/p>\n Security<\/p>\n Specific assets (e.g., real estate)<\/p>\n Only a promissory note<\/p>\n If the project fails<\/p>\n A basis to enforce against the collateral and recover funds<\/p>\n Little realistic prospect of recovery<\/p>\n Order of repayment<\/p>\n Ahead in line<\/p>\n Last in line<\/p>\n In long-established EB-5 markets such as China, investors have consistently favored projects with bank participation<\/strong> in the capital stack. The reason is that banks run extremely rigorous due diligence, from asset appraisal to legal and insurance review; a project that a bank has vetted gives investors more confidence.<\/p>\n There is no single formula for every project \u2014 the capital stack depends on the industry. However, in some projects the developer equity ratio<\/strong> (the developer’s own capital) is only around 10%, a level that is not recommended. The higher the developer equity ratio, the stronger the evidence of the developer’s commitment to, and accountability for, the project’s success.<\/p>\n So when assessing a project, don’t look only at the total capitalization. Break it down: how much is developer equity? How much is bank debt? And where does your EB-5 capital sit within that?<\/p>\n Beyond assessing immigration risk and investment risk, investors must also ask: where will the project get the money to repay investors?<\/strong> Each project has its own repayment strategy, depending on its business model. Many projects state that they \u201chave a developer guarantee,\u201d but the question to ask is: in a worst-case scenario, how would that guarantee actually be triggered, and how much liquidity would stand behind it to protect investors?<\/p>\n Practical advice: many projects look dazzling from the outside, with beautiful, upscale renderings. Set those images aside and look at the legal documents. If you can’t work through that thick stack of documents yourself, engage a qualified firm to do it for you.<\/p>\n Analyzing a capital stack is not a job reserved for lawyers or financial experts. With three key questions, investors can make an initial assessment on their own:<\/p>\n Frequently asked questions<\/p>\n Is EB-5 capital usually equity or a loan?<\/p>\n Most projects use a loan model (the NCE lends to the project company). However, it is the terms of that loan \u2014 whether or not it is secured by collateral \u2014 that really determine how well the capital is protected.<\/p>\n What does an unsecured loan mean?<\/p>\n It is a loan with no specific collateral behind it. If the project fails, the unsecured lender stands at the back of the queue and has little realistic prospect of recovering its capital.<\/p>\n Why favor projects with bank participation?<\/p>\n Not because the bank protects EB-5 investors directly, but because the bank has already carried out rigorous due diligence on the project before lending \u2014 an independent layer of verification.<\/p>\n What does the equity ratio tell you?<\/p>\n The higher the ratio, the greater the developer’s commitment to and accountability for the project. A level of only around 10% is not recommended.<\/p>\n What is the difference between a 1st lien and a 2nd lien?<\/p>\n A 1st lien (first-position lien) is paid first when the asset is liquidated. A 2nd lien is paid only after the 1st lien has been repaid in full. Most EB-5 capital sits in a 2nd-lien position or lower.<\/p>\n Which exit strategy is the safest?<\/p>\n No exit strategy is without risk. What matters is that it is clear, has a specific timeline, and has a real track record from projects by the same regional center or developer. \u201cWe will refinance when the market improves\u201d is not an adequate exit strategy.<\/p>\n","protected":false},"excerpt":{"rendered":" The EB-5 Capital Stack: Where Does Your Investment Sit in the Project? The word \u201cloan\u201d sounds safer than \u201cequity\u201d \u2014 but it is where you rank in the repayment order that determines when you get repaid, and whether you get repaid at all. Not all loans are equally secured. This article helps you see where […]<\/p>\n","protected":false},"author":1,"featured_media":98532,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"image","meta":{"_acf_changed":false,"_yoast_wpseo_is_cornerstone":"","_yoast_wpseo_meta-robots-noindex":"1","_yoast_wpseo_meta-robots-nofollow":"","_yoast_wpseo_meta-robots-adv":"","_yoast_wpseo_bctitle":"","_yoast_wpseo_canonical":"","_yoast_wpseo_opengraph-title":"","_yoast_wpseo_opengraph-description":"","_yoast_wpseo_opengraph-image":"","_yoast_wpseo_opengraph-image-id":"","_yoast_wpseo_twitter-title":"","_yoast_wpseo_twitter-description":"","_yoast_wpseo_twitter-image":"","_yoast_wpseo_twitter-image-id":"","_glsr_average":0,"_glsr_ranking":0,"_glsr_reviews":0,"_wpcom_ai_launchpad_first_post":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[4174,4172,4175],"tags":[],"class_list":["post-102265","post","type-post","status-publish","format-image","has-post-thumbnail","hentry","category-eb5","category-investment-immigration","category-us","post_format-post-format-image"],"acf":[],"yoast_head":"\u201cLoan or equity?\u201d is not the only question to ask<\/h2>\n
Cash flow as a priority queue<\/h2>\n
The role of banks and developer equity<\/h2>\n
Don’t forget: where will the money to repay you come from?<\/h2>\n
Conclusion<\/h2>\n
\n
Quick answers on the EB-5 capital stack<\/h2>\n