How To Reduce Your E-2 Visa Risk With An E-2 Escrow Agreement

E-2 escrow agreements are designed to mitigate risk. As an investor that wants to obtain an E-2 visa so they can start or buy a business in the US, your investment funds will be required to be “at risk”, even before you make your visa application. So how do you protect yourself and make sure your funds are sufficiently “at risk”? Through E-2 escrow agreements is how.

Putting Your Funds “At Risk”

It is a requirement in the E-2 visa application process that your funds be “at risk”. This means that you must have irrevocably committed funds to the business enterprise you want to start or buy. It must be difficult for you to simply walk away from your investment.

Due to this, funds in your bank account, supposedly set aside for the business are not considered at risk. A loan secured against business assets is not considered risky either. You would have to be personally liable in the event of default.

Your Investment Amount And Risked Funds

Is it all of your investment funds that are required to be at risk? No. Your investment funds are different from the funds required to be at risk.

Investment funds are the entire amount you wish to invest in the business enterprise. For instance, if you want to invest a total of $300,000 in a business, then that’s your investment fund. It is your working capital and is not at risk.

The “at risk” amount covers the funds you have already spent or are expected to have spent on your business. This can include legal fees, a lease, equipment and inventory. For instance, if you have spent $100,000 on these items out of the $300,000 then $100,000 is at risk while the remaining $200,000 is your working capital.

How Does An E-2 Escrow Agreement Help?

$100,000 is a lot of money and we are certain you would not want to watch it ride into the sunset with your E-2 visa rejection. There is a high risk of this happening though as the government insists that funds must be at risk before you even start making your E-2 application.

E-2 escrow agreements provide you with a safe way to safeguard funds while making your E-2 visa application. You may be wondering how your investment can be considered “at risk” when you have pretty much ensured you are protected from losing it. Here’s how it works.

When you want to make asset purchases for the E-2 business or even when you want to buy the E-2 business itself or a franchise license, you can have your lawyer draft an escrow agreement for that transaction. It would be specifically included in the agreement that the funds will be transferred to an escrow agent and will only be released when your E-2 application is approved.

Effectively, the money has left your control under the agreement, and this fulfils the requirement that the money be “at risk”. The key to making sure that the funds are considered “at risk” is to make their permanent transfer dependent only on the approval of your E-2 visa.