In recent years, numerous U.S. business owners have expressed interest in the EB-5 investment industry. The EB-5 program has for many years allowed foreign nationals to receive U.S. green cards in exchange for investing in qualifying businesses. Since EB-5 investment capital is often available at below-market rates, it is especially convenient for the U.S. economy.
The EB-5 investment industry is overseen by United States Citizenship and Immigration Services (USCIS). Moreover, making an EB-5 investment does not guarantee that a foreign national will receive permanent resident status: USCIS will carefully examine the investment to ensure that it complies with the EB-5 program’s requirements. EB-5 investors receive permanent residency only after their I-526 and I-829 visa petitions have been approved. USCIS requires all EB-5 investments to create a minimum of 10 jobs, remain at risk, and fulfill many other criteria.
Therefore, EB-5 projects must be tailored to the needs of EB-5 investors and comply with all USCIS guidelines. Project developers should take care to offer ample job creation potential, avoid relying solely on EB-5 capital, and try to obtain TEA designation.
Potential for Employment Creation
One of the main purposes of the EB-5 program is to reduce unemployment, so USCIS is strict about its job creation requirement. Even though each investor needs to be allotted a minimum of 10 jobs, EB-5 project developers are recommended to create more than the minimum number of jobs. EB-5 projects with an ample job cushion are perceived as safer and are thus popular among investors.
In some cases, investors may wait until a project has already created several jobs and then subscribe. For instance, a construction project that is open to a maximum of 10 EB-5 investors may plan on creating approximately 300 jobs. Once construction is halfway through, about 150 jobs will have been created. An EB-5 investor who subscribes to the project at this point will already fulfill the employment creation requirement.
Avoiding Reliance on EB-5 Funding
The safest and most popular projects do not rely on EB-5 funding for completion; EB-5 investment capital should make up a relatively small portion of the overall capital stack. Therefore, the project should be successfully completed even if there is a shortfall of EB-5 funds. Having alternative sources of funding is perhaps the most important factor that determines a project’s reliability from an immigration perspective.
Alternative sources of funding can include an initial bridge loan or additional sources of debt or equity. Irrevocably committed developer funds, a construction completion guarantee (if applicable), and a senior loan with a major bank will also add to an EB-5 project’s reliability from an immigration perspective.
TEA Designation
The standard EB-5 investment threshold is $1,000,000, but EB-5 projects located in targeted employment areas (TEAs) can receive investments of only $500,000. Naturally, most investors look for projects located in TEAs.
The EB-5 industry offers valuable opportunities for U.S. business owners. As long as an EB-5 project has sufficient job creation potential, does not rely on EB5 investment funds for completion, and possesses TEA status, it will likely attract EB-5 investors. Interested project developers should consult with EB5AN, which has helped numerous U.S. businesses obtain EB-5 capital.
