It has become quite obvious that the early release mechanism for escrowed funds is becoming the norm and not an exception. The whole concept of early release arose at the end of 2011 when it became apparent that USCIS was not going to undertake premium processing for I-526 Petitions. I was one of the initial architects of the early release concept when it became obvious the developers could not wait one and half to two years to receive funds after I-526 approval given the substantial time delays in receiving adjudication.
Since that time, the industry has evolved and come up with may complicated options related to the early release concept which will be discussed below.
Holdback Concept. Rather than having a complete early release of funds, a portion of the capital contribution of an investor would be held back in an account and serve as a pool to cover all denied investors so that if only a smaller percentage of investors were denied [assuming no project denial], then the held back fund would be able to fund a refund to an investor in a timely manner. This concept has taken hold with escrow holdbacks ranging typically from 20% to 50%.
Interim Escrow Funding Requirements. Many escrow agent banks require a certain minimum amount of capital be funded in order to ensure that there is a sufficient amount of proceeds to fund denials based upon a percentage of the total capital raise so that there is at least few million dollars more in escrow to cover refunds to a sufficient number of investors.
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