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EB-5 escrow structure impacts project marketability and funding

While the use of an escrow is not a requirement for EB-5 projects, many people consider it to be best practice during the I-526 adjudication phase. In fact, when searching for potential projects, investors often prefer those that use an escrow to those that don’t.

Back when I-526 processing times were less than six months, the common practice was to hold an investor’s subscription funds in escrow until the adjudication process for such investor was complete. That way investors and issuers were assured that funds would be available to return investor’s subscription funds in the event there was a denial. However, as processing times have continued to lengthen, this type of escrow structure is not always viable. As a result, NES Financial has developed different types of escrows models that balance the timing needs of the issuer with the security needs of the investor.

But which model is the best fit for your project? Because the needs of each project differ, a good thing to keep in mind before making this decision is to think about how the different escrow models would directly affect the outcome of your specific project – especially when it comes to marketability.

NES Financial has pulled data from our experience working in over 300 EB-5 projects to draw some conclusions as to the pros and cons of using one type of escrow structure over another.

In general, investors prefer to invest in projects that use more conservative escrow release triggers. Our data has consistently shown that projects with more conservative escrow triggers in place not only raise more capital on average but also fund quicker than their counterparts.

No matter which EB-5 escrow type you choose, when it comes down to it, some type of escrow is always better than no escrow.

Further explanation and other data can be found in previously published NES Financial white paper. Download it for free here.

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2017-05-14T04:18:40+00:00 May 21st, 2015|Categories: EB-5|Tags: , , |