A Valuable Opportunity for Business Leaders

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The EB-5 Immigrant Investor Program, which allows foreign investors who meet certain requirements to obtain permanent U.S. residency, has been providing U.S. business leaders with a secure source of investment capital since 1990. EB-5 investment funds, which are often available at below-market rates, have been used to support commerce in a wide variety of industries, with many foreign nationals willing to provide EB-5 capital. United States Citizenship and Immigration Services (USCIS), which oversees this sector of the investment industry, ensures that EB-5 business owners and investors comply with all applicable requirements. As the founder and managing partner of a leading EB-5 firm, I have helped many people source capital and comply with USCIS regulations.

Guidelines for investment projects

One of the main objectives of the EB-5 investment program is to combat unemployment by creating jobs. Therefore, every investment must result in the creation of at least 10 full-time positions for qualifying U.S. workers, and they must last a minimum of two years.

The EB-5 program offers foreign nationals two options: direct and regional center-sponsored projects. In the latter model, capital is invested through the intermediation of an economic unit known as a regional center, and resulting regional center projects are given more flexible job creation criteria than direct projects. An additional distinction is that while direct EB-5 investors are only allowed to count employment that appears on the company’s payroll, regional center investors can also include induced and indirect jobs — employment that is a result of the expenditures made by the EB-5 project and its workers in the locality.  

Perhaps the most important difference between direct and regional center EB-5 investment is that the latter is subject to periodic government reauthorization. In fact, the EB-5 Regional Center Program expired on June 30, 2021, and has not been revalidated as of the October writing of this article. So, currently, all EB-5 investments must be direct. Moreover, on June 22, the minimum EB-5 investment threshold was lowered to $500,000 for targeted employment area (TEA) businesses and $1,000,000 for businesses outside TEAs. (A TEA is either a rural or high-unemployment area in need of economic development.) Consequently, many more foreign nationals can now make a direct EB-5 investment.

Related: What Is the EB-5 Immigrant Investor Program?

As a business leader, you should act now to take advantage of the valuable opportunity to source direct EB-5 capital: USCIS has already filed an appeal against the court ruling that lowered the investment requirement, and the regional center program may be reauthorized in the coming months. Keep in mind, however, requirements for direct EB-5 businesses:

1. A suitable business structure

In direct EB-5 projects, the new commercial enterprise (NCE) must be the same as the job-creating entity (JCE). Therefore, the NCE must be able to create at least 10 jobs per investor. Generally, your business must also be able to receive equity investments, but direct investors can choose to invest in a subsidiary that is wholly owned by a parent company.

2. Using at-risk EB-5 funds

USCIS dictates that all EB-5 investors must be able to experience either gains or losses. This means that direct investment capital must be irrevocably committed to the project, and there can be no guarantees regarding the financial resolution of the investment. Contractual rights to repayment are not allowed.

3. Potential for employment creation

As mentioned previously, every EB-5 business must create at least 10 full-time jobs per investor. When completing Form I-829, investors must show USCIS that their capital was used to hire U.S. workers; therefore, it’s important to keep detailed employment records. Moreover, foreign nationals usually favor EB-5 projects that plan to create more than 10 jobs per investor, thus accounting for any contingencies.

4. A credible business plan

To obtain USCIS approval, you must submit a detailed business plan that describes your enterprise and how it will comply with EB-5 regulations. It is especially important to use credible evidence (such as third-party financial analysis) to prove that you will create the required number of jobs. To this end, your plan must include descriptions of each planned job, a hiring timetable and a staffing plan.

Related: How to Write a Business Plan

5. A viable business type

EB-5 projects can conduct business in virtually any industry, as long as their operations are legal. However, certain types are better suited for the direct investment model. For instance, smaller businesses can subscribe fewer investors and thus have smaller job creation requirements. (Many direct investors choose businesses in the restaurant, retail trade and wholesale industries.)

If your business can comply with the above requirements, you may be in a position to raise direct EB5 investment funds. Even though obtaining them is a complex process that requires careful planning and consultation, doing so can be more than worthwhile.