To comply with the EB-5 program’s at-risk criteria, EB-5 investors must not receive a guarantee of return on their investment (e.g., a contractual right to repayment such as a redemption agreement). This is the essence of the at-risk requirement. Investors should carefully examine potential projects to find out whether such language is included in the project documentation. It is particularly important to examine each project’s exit strategy for investors.
Due to the at-risk requirement, every EB-5 investor must be exposed to either financial loss or gain, so the investment’s financial resolution cannot be predetermined. Foreign nationals planning an EB-5 investment must acknowledge that they could experience significant financial loss.
Some EB-5 projects guarantee that their investors will eventually own or use an asset. In these cases, the projected value of the asset is subtracted from the minimum investment amount; therefore, investors must provide more than the minimum required EB-5 capital. Even though investors must typically provide the entirety of their investment at once, some projects allow partial investments, which can be made in installments during a set period.
In addition to being exposed to financial loss, EB-5 investors must show United States Citizenship and Immigration Services (USCIS) that business activity is indeed taking place. The project’s business plan is an essential part of such evidence.
When evaluating EB-5 investment opportunities, foreign nationals need to look for signs that the project complies with the at-risk requirement. For example, each project’s offering and business plan must give investors the opportunity to gain profits or experience loss. Moreover, the new commercial enterprise (NCE) must be obligated to make all of the EB-5 funds available to the job-creating entity (JCE). The project’s business plan must show when the EB-5 capital will be deployed and give evidence of ongoing business activity. Due to the complexity of the EB-5 program’s regulations, foreign nationals should retain an experience immigration attorney to help them identify reliable projects that comply with USCIS’s guidelines.