Understanding Escrow Agreement: The Importance of Escrow for Your E2 Visa Investment
What is an escrow agreement?
An escrow agreement is a binding contract that aims to protect both parties' interests with terms and conditions.
Escrow is a financial agreement that gives permission to a third-party to holds and manages the funds, assets, or documents on behalf of the two parties involved in a transaction. Escrow is important because the funds of your investment are held in a trust until certain terms and condition are met, such as the completion of a real estate sale or the successful completion of a business acquisition.
The escrow agreement highlights the responsibilities and obligations of each party, the conditions under which the funds or assets will be released from escrow, and the timeline for completing the transaction. The escrow agreement is typically prepared by a neutral third-party, such as an attorney or an escrow agent, and is signed by both parties involved in the transaction. The agreement is a crucial document that helps ensure that the escrow arrangement proceeds smoothly and without misunderstandings.
In an E2 visa investment, an escrow agreement may be used to hold funds while the E2 visa application is waiting to be approved. The agreement will specify the conditions under which the funds will be released from escrow, such as the completion of due diligence, the approval of the E2 visa, or the successful transfer of ownership.
Essential Criteria for E2 Visa Investment Approval
What Key Criteria Must Be Satisfied for an Investment to Be Deemed Substantial for an E2 Visa?
At the center of every E2 visa application is one unavoidable question: Is the investment substantial enough to qualify? U.S. immigration law does not define substantial by a fixed dollar amount. Instead, it requires a case-by-case review of the investment’s size, structure, and impact on the business.
Investors seeking an E2 visa must be prepared to document not just the amount invested, but the real financial risk, legal source of funds, and the operational strength of the business itself.
Each of the following criteria must be met based on clear, objective standards published by U.S. Citizenship and Immigration Services (USCIS).
1. Investment Must Be Proportional to the Business Cost
U.S. immigration authorities assess whether the investment is substantial compared to the total cost of purchasing or establishing the business. For lower-cost businesses, investors are expected to invest a higher percentage of the overall value.
2. Funds Must Be Fully Committed to the Business
The investment must be irrevocably committed to the business. This means that funds should already be used for business expenses or be held in escrow pending the finalization of the visa. Simply having money available or planning to invest it later is not sufficient.
3. The Investment Must Be Sufficient to Launch and Sustain the Business
The amount invested must be enough to make the business fully operational. Immigration officers assess whether the business could function and be viable based on the actual investment made. Partial investments that leave the business incomplete or non-functional generally do not qualify.
4. Capital Must Be Actively at Risk
The investment must be subject to real financial risk. It must be committed to the commercial success of the business and exposed to potential loss. Funds that are sitting idle in a bank account or are otherwise not at commercial risk do not meet this requirement.
5. Funds Must Originate from Lawful Sources
The investor must prove that all invested funds have been obtained legally. Acceptable sources include employment income, business profits, personal savings, gifts, or inheritances. Detailed documentation is required to trace the source and path of funds from origin to investment.
6. The Business Must Be Active and Commercial
The enterprise must be a real and active commercial business providing goods or services.
Passive investments, such as undeveloped real estate or stock holdings, do not qualify for E2 purposes. The business must operate with the clear objective of generating revenue and profit.
7. The Enterprise Must Offer More Than Minimal Income
The business must have the present or future ability to generate income significantly above a minimal living for the investor and their family. The enterprise should demonstrate potential for economic viability within five years of the investor’s E2 status being granted. Businesses that are purely marginal, providing only basic subsistence, do not meet E2 visa standards.
Meeting the substantial investment requirement for an E2 visa involves far more than reaching a certain dollar figure. It demands full financial commitment, proof of lawful funds, active investment risk, and a business capable of real economic activity and growth. Investors who treat these requirements with the seriousness they deserve are positioned to present a stronger, more credible case for E2 visa approval.
What Is the Purpose of the Substantial Investment Requirement for an E2 Visa?
The substantial investment requirement ensures that the investor is actively committed to developing and directing a real operating business in the United States. U.S. immigration authorities assess the scale and structure of the investment to confirm that it reflects genuine entrepreneurial intent and that the investor is engaged in more than a passive or speculative financial arrangement.
The requirement also serves to protect the integrity of the E2 visa program. By mandating that the investment be substantial, the United States seeks to attract investors who will make a meaningful economic contribution. The expectation is that the enterprise will not be marginal but instead will have the present or future capacity to create economic value beyond providing a minimal income for the investor and their family.
In practical terms, the substantial investment requirement helps ensure that E2 visa holders are entering the U.S. economy as active business owners with a real financial stake rather than individuals seeking immigration benefits through nominal or low-risk ventures.
What Are the Examples of Substantial Investments in Businesses With Different Total Costs?
The U.S. Citizenship and Immigration Services (USCIS) evaluates the size of the investment in proportion to the total cost of the business. For a small business with a total cost of around $100,000, the investor is generally expected to invest nearly the entire amount, often around 90 percent to 100 percent. For example, if the total cost to purchase or start a small café is $100,000, an investment of $90,000 to $100,000 would typically be considered substantial. In contrast, for a business with a much higher value, such as a manufacturing company valued at $1 million, an investment covering approximately 50 percent to 60 percent of the total cost may satisfy the substantiality requirement, depending on the specific facts and circumstances.
The key principle is that the lower the cost of the business, the higher the percentage of investment needed to demonstrate commitment and financial risk. As the business cost increases, the required percentage may decrease, provided the investment remains large enough to make the enterprise operational and viable. Each case is assessed individually, but the USCIS expects the investor’s financial involvement to be significant enough to indicate a real dedication to the success of the business and to meet the E-2 visa requirements.