Generally, when an investor chooses a Regional Center project to invest in, she will wire her funds to the Regional Center’s escrow account. The EB-5 regulations require that funds must have been “invested” (or be in the process of investing – though no one wants to take a chance on that anymore) in a U.S. business and over the years, the USCIS has agreed that placing the investment funds in an escrow account will be sufficient to meet the investment requirement. In other words, placing funds in an escrow account is not a USCIS requirement, but a business best-practice that has developed over the years. In other words, escrow terms are business specific and the escrow agreement is one of those documents that the investor must really read. (Well, the investor really should read ALL the documents given to her, but not many do.) Generally, the $500,000 principal will only be released to the project once the investor’s I-526 is approved. The subscription fee (which ranges from approximately $40,000 to $50,000) may or may not be released immediately after the investor wires the funds to the escrow account.
Recently, however, I am seeing more Regional Center projects moving away from the traditional escrow model. For example, one well-established Regional Center with a fantastic track record has amended its escrow to say that the investment principal will be released to the project when i) an exemplar I-526 is approved or ii) when the first three I-526s are approved, whichever happens first. With I-526 approvals taking up to 8 or 9 months, it is no surprise that project owners and Regional Centers are trying to develop new ways to speed things up. But it is one thing when a “well-established Regional Center with a fantastic track record” does this. It is another thing when a brand new project for a brand new Regional Center has no escrow account at all. That the project has no escrow account in and of itself does not mean that it is a bad project. But I would think that it would be something that the agent selling the project points out affirmatively. (At least they were in the risk factors of the PPM.)