Free EB-5 Project Evaluation

How to Qualify for EB-5 Funding

How to Qualify for EB-5 Funding

The EB-5 investment industry has afforded valuable opportunities to foreign nationals and U.S. business owners alike. In exchange for making an investment of at least $500,000 in a U.S. business, foreign nationals can apply for permanent resident status. Of course, a foreign national can be granted residency only if their EB-5 investment complies with all United States Citizenship and Immigration Services (USCIS) regulations. USCIS regulates EB-5 investments through Form I-526 and Form I-829, which investors must submit during the EB-5 process.

Project developers interested in the EB-5 industry must take care to ensure compliance with USCIS regulations. Even though raising EB5 investment funding is complex and can take several years, many U.S. businesses have benefitted from the below-market rates for EB-5 capital. To qualify for EB-5 funding, project developers must take the following steps.

Structuring an EB-5 Project

When deciding how to structure their EB-5 projects, developers must choose between offering a loan or an equity investment. All EB-5 projects involve a new commercial enterprise (NCE)—that is, the entity that receives the EB5 investment capital—and a job-creating entity (JCE). The NCE can either make a loan to the JCE or invest equity in it.

In equity EB-5 projects, investors are typically more involved in business management. This investment model is often used for smaller EB-5 projects. In contrast, most EB-5 investors choose loan projects, which are widely viewed as more secure. EB-5 investors in loan projects often play a limited role in day-to-day operations.

Once the investment type has been decided, an EB-5 project must gather several important documents, including a credible economic analysis, legal offering documents, a market feasibility study, an outline of the exit strategy for investors, and a business plan.

It is crucial for EB-5 business plans to show compliance with USCIS regulations. The Matter of Ho court ruling left a valuable precedent for EB-5 business owners and shows the major elements that must be included in an EB-5 business plan. These include descriptions of the project’s nature, business structure, job creation plans, budget, and personnel.

Ensuring Job Creation

Perhaps the most important USCIS requirement is that every EB-5 investment must generate at least 10 full-time jobs for U.S. workers. In light of this rule, EB-5 investors tend to favor projects with strong potential for job creation. Project developers should, in fact, aim to create more than 10 jobs per investor and thus offer a safer investment opportunity.

Moreover, the projected EB-5 capital raise will depend on the project’s capacity for job creation. The minimum EB-5 investment thresholds are $500,000 for targeted employment area (TEA) projects and $1,000,000 for non-TEA projects. For example, suppose that an EB-5 project’s job creation capacity can accommodate a maximum of 10 EB-5 investors. If the project is located in a TEA, it can therefore aim to receive $5,000,000 in EB-5 investment capital.

Projects that are carefully structured to follow USCIS requirements and have adequate potential for creating jobs will likely succeed in the EB-5 industry. Since keeping track of the many EB-5 regulations for project developers can be difficult, consulting firms such as EB5 Affiliate Network offer invaluable guidance on how to raise EB-5 investment funding.