With the credit agreement showing the loan is secured on his personal residence and that he is personally liable, the advance records, and the transfer trail into the escrow. Loans secured on the target business's assets are not treated as the investor's capital.
Personal security makes borrowed money the investor's own
Borrowed funds can form part of an E-2 investment, but only when the investor bears the risk. The guidance draws the line at collateral: indebtedness secured by the investor's personal assets, such as a mortgage or line of credit on his home, is capital at risk because he must repay it whether or not the business succeeds. Indebtedness secured by the assets of the enterprise itself is not, since the lender rather than the investor would absorb the loss.
The file should therefore include the credit agreement with its security clause, the property title or mortgage registration confirming the collateral, the lender's statements showing the amounts drawn, and the wire confirmations that move those amounts into the escrow account. Pair that with the sale documents for the Quebec business so that the total investment is traced from two clearly separate sources. Statements should be complete rather than excerpted, and any French-language agreements need certified translations.
A summary table that lists each source, amount, date and destination helps the officer follow the path in minutes.