Borrow $800,000 for an EB-5 investment, and USCIS calls it capital. But if you borrowed the exact same amount for Canada’s old immigrant investor program, it barely counted as money at all. The same debt with two different outcomes.
In this episode, Mona and Rebecca dig into the collapse of the Canadian Immigrant Investor Program, showing how a structure built on interest-free government loans and zero investment risk quietly hollowed out its own economic case, leading to the central question: what actually makes borrowed money legitimate capital?
Listeners may remember the Zhang litigation from the 2015 EB-5 era. The years-long fight over whether loan proceeds could qualify as valid capital or should instead be treated as “indebtedness,” and how the fungibility of cash became one of the most contested issues in EB-5 source-of-funds review. Tune in to find out more.
“The virtue of EB-5 is not that it keeps borrowed money out. It’s that it asks the right questions.” – Mona Shah, Esq.
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Transcript
This transcript was produced using AI and subsequently edited for style and clarity. The edits do not alter the substance of the speaker’s remarks
Mona Shah (0:59 – 1:30)
Hey, Rebecca, one puzzle before we get into any of this topic. Borrow $800,000, put it into an American project, and that’s considered capital. That’s legal.
That’s the whole point of EB-5. However, borrow the same $800,000 for the old Canadian program, and it brought no new money into the country at all. And it’s one of the reasons the program was wound down.
Yeah, it was the same borrowed dollar, but opposite results.
Rebecca Singh (1:30 – 2:08)
So is borrowed money the problem here, or isn’t it? Well, that’s the whole episode for today. It’s not really a contradiction.
The difference was never the borrowing, actually. It was whether new money came in to the country, and whether was it ever put into risk. In Canada, on both accounts, no.
The money was lent by Canadian banks. It was given to the Canadian government, interest-free, and guaranteed back. And you know for sure in the EB-5 program, that is not allowed.
And so it had new, fresh money coming in, and it’s at risk.
Mona Shah (2:09 – 2:30)
Here, 12 years ago, I wrote an article, and I’m going to quote myself, but it was the sentence that really started all of this, and the first reason we gave for why the Canadian program wasn’t working. And I quote, little new money, almost all the investment comes from loans from Canadian banks to provincial governments, unlike EB-5.
Rebecca Singh (2:31 – 2:40)
Unlike EB-5, and that’s air quotes. Two words, Mona, two words. So today, we’re going to find out whether they’re still true.
Mona Shah (2:41 – 2:47)
And they are, but in exactly one condition, and that condition is under pressure right now, and that’s really where we’re heading.
Rebecca Singh (2:47-2:50)
So Mona, before we get into the U.S.
Mona Shah (2:50-2:58)
I know what you want to do. You want, before we defend any American position, you want to see where, what’s wrong, what went wrong, right?
Rebecca Singh (2:58 – 3:06)
Exactly. So take us through, what did Canada do? Because its structure was a bit stranger than what most people remembered.
Mona Shah (3:07 – 3:23)
Yes, and of course, this program is now closed. So the odd part out loud, the investment itself was a loan to a government, interest-free, guaranteed back, there was never any question of the capital being at risk, because risk wasn’t even part of the design.
Rebecca Singh (3:23 – 3:28)
Yeah, which is a huge no-no in EB-5, but…
Mona Shah (3:28 – 4:00)
Well, there was a second layer. There was a second layer, sorry, just before we go into it. The second layer that people did forget was that applicants never wrote a check for the full amount.
The Canadian banks financed it. The investor put down roughly $150,000, which was non-refundable, and that covered the bank’s fees, its interest, and agents’ commission. So it was the bank who made money and funded the balance, and lawyers, of course.
Rebecca Singh (3:53 – 4:00)
Yeah, so never actually went into any projects or pretty much any of the infrastructure in Canada.
Mona Shah (4:00 – 4:07)
No, no, no. It was two layers of debt with a state guarantee at the end of the chain. And really, that’s really why Ottawa closed it.
Rebecca Singh (4:07 – 4:19)
Yeah, so it wasn’t really giving any economic benefit at all. As we said, there’s very little new money coming in, because almost all of the initial investments came from the bank loan itself.
Mona Shah (4:19 – 4:57)
Yeah, and actually, when Ottawa were closing it, the most quoted part were the tax numbers, because over a 20-year career, an immigrant investor paid roughly $200,000 or less in income tax than a federal-skilled worker, and nearly $100,000 less than a live-in caregiver. That was all from Ottawa’s framing. So yeah, Canada was offering a guaranteed permanent residence for an $800,000 loan at a moment when capital moved freely across the borders and interest rates were on the floor, while peer countries had raised that, and they had raised what they had demanded.
Rebecca Singh (4:57 – 5:04)
So, the criticism was never investors borrowed. Borrowing was just a symptom, and the structure ended up being a disease.
Mona Shah (5:05 – 5:35)
Oh, that’s a very colourful way of saying it, Rebecca. But yeah, the bad thing was, the last thing about the Canadian program, before we really jump into why loan is capital, but the bad thing about the Canadian program was when they closed, I remember that they had reported backlog figures, you know, they were super high, something like 65,000 to 75,000 people, yeah. But again, it was a popular program, but they only spent $150,000 and they got Canadian citizenship.
Rebecca Singh (5:35 – 5:42)
I mean, I know, that’s actually less than what you have to pay for the Grenadian program. I know, I know.
Mona Shah (5:42 – 5:58)
But you know, the question that Canada never had to answer though, and I think that really, this really strikes me, is that Canada never had to define capital, whereas the U.S. did. And that’s probably why the EB-5 program is still here.
Rebecca Singh (5:58 – 6:31)
Yeah. But you know, the EB-5 program as well, did have some issues to define capital when it came to loans as well. I know for those who are back in EB-5, back in the 2015 era, there was issues, remember Mona, with the Zhang case that came out.
First, USCIS was accepting loans, right? We didn’t have an issue. We were filing loans left, right and centre.
Yes. But then in 2015, they decided to deny cases.
Mona Shah (6:32 – 7:04)
Yeah. Well, we don’t remember. The U.S. is the queen of litigation. And so EB-5 regulates contribution, right? Capital goes into a privately owned new commercial enterprise. It’s got to be at risk.
It must create jobs. So I feel like the law is forced to say what the contribution consists of. And then when USCIS arbitrarily makes its own rules, guess what?
Someone goes and litigates. But very quickly, how did we get to where we were? And tell us a little bit about the Zhang case.
Rebecca Singh (7:04 – 7:25)
So what happened here is that USCIS decided to say that a loan, if you were getting a loan from a bank or even a personal loan, for instance, from third parties, that it was no longer considered capital. They insisted that it was actually indebtedness.
Mona Shah (7:25 – 7:33)
Oh, yes. I remember because we got a whole bunch of cases denied because they overnight decided to change their minds. Yeah.
Rebecca Singh (7:33 – 8:28)
And I remember the entire industry where we were now trying to define, well, what is indebtedness, right? And at the same time, you were actually giving cash. So how was that indebtedness?
And I think the other issue to that as well with the Zhang case was that if you were taking a loan and if they did accept it as a loan, it wasn’t then secured by any assets of the investor. So there were plenty of times where we had students who had funds from parents, let’s say. Or we had a case where we had two sisters who ended up taking a loan from parents.
And then that ended up being, well, luckily, we withdrew the case before when this came out, when we were seeing that they were denying these loans just because they didn’t have any assets against the loan. And I mean, who would? It’s coming from your mom and dad.
Yeah, exactly. Yeah, exactly.
Mona Shah (8:29 – 8:34)
And then, of course, your favourite word, cash is fungible. Yeah.
Rebecca Singh (8:35 – 9:03)
Yeah. So I don’t know why at the end of the day, and it’s funny because today USCIS brings that back to us in some other RFEs and saying that now cash is fungible within the bank statements. That’s a whole new issue.
But at this time, it’s cash, right? It’s just a slip to the project and say, here’s my loan or my contribution. You are giving cash.
I mean, I can’t stress that enough.
Mona Shah (9:03 – 9:35)
Well, people do ask because the old regulation did define cash as, did define capital as cash or cash equivalent, meaning sort of equipment and those kind of things. But those are very difficult to prove, right? You have to get so much evidence to show how much this particular piece of, say it’s an IP or it’s farm equipment or something, how much it’s actually worth and whether that really does count as cash.
And, you know, be prepared if you do that to be RFE to death.
Rebecca Singh (9:36 – 10:06)
But at the same time, you know, what we saw in those cases, those were really in the direct standalone entrepreneurial cases where we saw clients themselves or the investor themselves putting their cash into buying and purchasing equipment or might have, you know, a loan with, but you cannot have the loan and have the NCE assets, right? So, yeah. So it had to be the investor’s own assets, not the NCEs.
So that was a difference.
Mona Shah (10:06 – 10:19)
So just to be clear for any listener, because people still ask RIA, you know, the EB-5 Reform and Integrity Act of 2022 did codify this and they did put it into law. Right?
Rebecca Singh (10:20 – 11:02)
Yes. Yeah. So well, after the Zhang case that carried on for six years, I believe it was, it was a long time.
Yes. And the judge did kind of come back and said, no, it’s not indebtedness. It’s you’re actually investing cash, you know, whether it’s a loan and how, how the investor received that cash, that’s the source of funds.
And that’s, that wasn’t the issue at that point. It was the fact that it wasn’t indebtedness at that point. Yeah.
So now what RIA did is, okay, great. You can have loans, but now they’ve put in a little caveat in there where now you have to make sure any gifts or loans that you’re receiving do not circumvent the regulations. And that’s the key.
Mona Shah (11:02 – 11:24)
What does circumvent the regulations actually mean? Oh, you know, so gifted and borrowed funds count only if they’re gifted or loaned in good faith. And I suppose you’re going back to, you know, bank of mom and dad, that’s easy to see that.
But if you actually have money, but you don’t want to show your money, I think that’s really what USCIS is trying to root out.
Rebecca Singh (11:25 – 11:44)
Yeah, exactly. All right. There’s a lot of clients out there who might have lets say black money and can’t really, you know, how do they, or, or maybe they just don’t have the documents to show how they legitimately earned these funds or lawfully earned the funds.
And so a simple resolution to that would be getting a loan.
Mona Shah (11:45 – 12:07)
Yeah. My 2014 article did say that EB5 had avoided the vices that killed the Canadian program. I don’t know where I came up with that at that point.
Not, I was a little naive, but that was true, but underexplained because I feel like Congress got it right by not keeping borrowed money out, but by locating the risk in the enterprise rather than the investor’s personal finances.
Rebecca Singh (12:08 – 12:42)
Hmm. Yeah. Well, at the end of the day, I mean, if you look at it common sense wise, right, it’s the investors have to pay back this loan.
Right. And I think with RIA, what USCIS is seeing is that who are you getting the loan from? Right.
That was a huge issue. We could get more into that. And then how are you able to repay that loan?
And at the end of the day, the Canadian program failed because you didn’t have to show any of that. Right. It was the government itself or the bank itself giving that money and receiving it itself.
Yeah.
Mona Shah (12:43 – 12:45)
And it’s no interest. That’s true.
Rebecca Singh (12:46 – 12:46)
I mean, how does that work?
Mona Shah (12:48 – 12:56)
And it’s interesting because we don’t see any of the other CBI programs doing this at all. I don’t think Nauru would accept a loan for what, 95,000?
Rebecca Singh (12:57 – 12:58)
Yeah. Or Sao Tome
Mona Shah (13:00 – 13:45)
And I suppose in that respect, EB-5 really is unusual because it stands on its own the way you can use non-collateralised loans from, you know, uncle and aunt and boyfriend and whatever. But are there any other residency and citizenship programs that let the applicant borrow? Well, there’s no really authoritative global account, to be honest.
I think, was it one of the big companies did do a published survey of financing options back in something 2023. And then Spain’s investor visa, which I think allowed, it was abolished in 2025. And of course, Greece raised its property thresholds in 24.
So I’m not sure whether they still allow some.
Mona Shah (13:46 – 13:48)
I suppose we could get back into that.
Rebecca Singh (13:48 – 13:56)
Yeah. I think with Greece, it was, I think you could have loans, but it wasn’t any loans. No banks in Greece itself financed those loans.There was outside capital.
Mona Shah (13:58 – 14:15)
And it was only for collateralised if there was anything. Yeah. Yeah.
I do know that the UAE property route actually at, I believe it’s 2 million dirhams that can be financed through local banks. And Turkey also requires threshold, but again, it has to be collateralised.
Rebecca Singh (14:15 – 14:19)
Yeah. But I think everything else is silent on loans. Even the Caribbean.
Mona Shah (14:20 – 14:20)
Yeah.
Rebecca Singh (14:21 – 14:40)
Yeah. So, but at the end of the day, everyone takes a loan, right? You, you take a loan to your mortgage, your house you do.
I mean, as long as it’s fresh capital coming into the country. Right. And that’s what they’re concerned about.
And is this, is this creating like in the U S program? Is it creating jobs? Is it stimulating the economy?
Mona Shah (14:41 – 14:56)
Yeah. Yeah. Well, let me ask you, because you do so many of these that, you know, it sounds, you know, RIA brought in non-collateralised loans and it sounds wonderful and generous.
Is it, are we seeing that?
Mona Shah (15:00 – 15:02)
Yeah. Removing the collateral requirement. Does it reduce the work? You know, tell me. Yeah.
Rebecca Singh (15:02-16:20)
No, no. It’s, it’s, you know, at times, well, here’s what RIA did on several fronts, right? One, they now said that before we, you still have to source how did mom and dad or any third parties who are giving you a personal loan, how you have to source where they received the funds.
Right now, what they’ve done is banks are okay. Those types of financial institutions, you could get a loan without having to go into the history. But the issue is, is any lending institutions, so that are not banks now have to actually provide where they’re getting their sources from to be able to give that loan.
Yeah. So yeah, they’ve made it a bit tougher. And then the other issues that we saw is that who is actually giving those loans?
And we saw it. And I think Mona you said this, we said it again. Yeah, that we saw maybe regional centres that were out there that were actually providing the loan to the investors.
And I think that’s where USCIS has come down hard on it, because that kind of goes back to the Canadian program in the sense that you’re giving the investors a loan. So, it’s not really fresh capital, is it? At the end of the day, you’ll get that return. Exactly.
Mona Shah (16:24 – 16:46)
I think we have an old podcast on that somewhere. So anyway, I love to bring you up and say, I told you so. Yeah.
But I feel bad for all the denied cases which came out. But what you’re basically saying, Rebecca, is that a financed file really is not one source of funds. It’s two, sometimes three.
Yeah. Sources.
Rebecca Singh (16:46 – 16:58)
Yeah. Yeah. I mean, sometimes we have way more than that.
Yeah. But I mean, I think we see loans more so now too, just because the amount went up as well.
Mona Shah (16:58 – 16:59)
Yeah.
Rebecca Singh (16:59 – 17:22)
And it’s harder to get to that 800,000 without having some kind of loan. I mean, popular too in the US itself is the home equity line of credit. So, we see that a lot.
But that’s collateralised right against your house. But I think the issue is whether or not those loans that are 200,000, 300,000, 400,000 that you’re getting that are not collateralised are those really legitimate loans.
Mona Shah (17:23 – 17:24)
Okay.
Rebecca Singh (17:24 – 17:46)
That’s where we’re trying to prevent the circumvention of just providing a loan. Maybe you know a lending institution who’s just like, oh, yeah, we’ll just give it to you, no worries, and not have to worry about it. But are you really repaying that?
So now a lot of times you do have to show, are you capable of repaying that loan? And are you making payments towards that loan at the end of the day?
Mona Shah (17:47 – 18:10)
Yeah. And really, you know, to be very candid, you know, in Canada, it was the recycling of the loan, which was the problem. But, you know, EB-5, it’s USCIS is looking at conduct and the design, meaning they’re actually denying sometimes first filings without even an RFE, because they’re just being very aggressive on this.
If they feel that you are circumventing.
Rebecca Singh (18:12 – 18:32)
Yeah. So yeah, we make sure we, you know, before we get into loans, we do make sure the clients are aware of what, you know, the potential risk that’s happening. And then I think a lot of times it’s showing what are you doing, or again, who is the lender and are you capable of repaying back this loan?
Mona Shah (18:33 – 18:43)
You know, Rebecca, I know you’ve been dealing with so many of these, but if you could just give our listener a takeaway, what would you advise about loans from friends and families?
Rebecca Singh (18:44 – 19:05)
I would say absolutely need to be sure you speak with your friend or family member first, because a lot of times they may be hesitant in providing documents, right? They have to understand that they have to provide seven years of tax returns. And Mona, we are well aware, we just spoke with a client who was very hesitant to give tax returns.
Mona Shah (19:06 – 19:13)
He wanted to give the money. He said, let me just write you a check. We’re like, no, we don’t want you to write a check.
We want to see the tax returns. Yes.
Rebecca Singh (19:13 – 19:47)
Yeah. So I think that’s the misunderstanding when it comes to third party personal loans is that they think they can just give the money and not realise how much sourcing gets involved with it. How many documentations you have to go through to show their sources and how they’re obtaining the funds to be able to give that loan.
And yeah, I can’t stress enough how much tax returns, bank statements, and these are personal documents. And a lot of times, like I said, I’ve seen a lot of clients will say, yeah, my friend will give this. And as soon as they hear what documents they have to provide, they do back out.
Yeah. Yeah.
Mona Shah (19:47 – 19:54)
Good advice. So to bring it back into a big circle, Congress got it right.
Rebecca Singh (19:54 – 20:02)
Yes. Yes. Yes, they actually did.
The virtue of the EB-5 is not that it keeps borrowed money out. It’s that it asks the right questions.