Every EB-5 investment carries inherent risks. These risks vary across different project types but can generally be categorized under two groups: immigration risk and financial risk.

These two risk categories align with the primary motivations for EB-5 investors. The main reason why foreign nationals invest in EB-5 projects is U.S. immigration, so immigration risk is the first consideration.

Additionally, with a substantial amount of money involved, protecting this investment is crucial, leading us to the second consideration—financial risk.

EB-5 investors are advised to meticulously evaluate the immigration and financial risks associated with any EB-5 project. It’s crucial to steer clear of projects that present high levels of either type of risk. Fortunately, there are low-risk projects available, and investors are encouraged to be discerning in their choices.

In this article, we will explore the two types of risks involved in EB-5 investments, and delve into what investors can do to mitigate these risks.

What Is Immigration Risk?

Immigration risk involves any factor that could hinder an investor’s main objective of securing a permanent Green Card to become a lawful permanent resident in the United States.

Mitigating immigration risk means tackling the key factors that lead to the denial of EB-5 immigrant petitions. Individual risks for EB-5 investors arise from their background and the accuracy of their petitions. Petitions can be rejected by the United States Citizenship and Immigration Services (USCIS) for reasons such as fraud, false representations, illicit sources of EB-5 investment capital, and other specific shortcomings related to an investor. To minimize these personal risks, EB-5 investors are advised to carefully choose their immigration counsel.

For investors who submit accurate applications in good faith, in addition to having clean backgrounds and legitimate source of funds, the most common reasons for the denial of EB-5 immigrant petitions involve lapses in compliance by regional centers or issues with the project itself, particularly a failure to generate the required number of jobs.

Compliance with EB-5 Requirements

USCIS requires strict compliance with the EB-5 program’s regulations. Navigating the EB-5 rules has always been complicated, requiring expertise to successfully set up projects that are eligible for EB-5 investments. The enactment of the EB-5 Reform and Integrity Act of 2022 made it even more important to have an experienced and well-informed regional center sponsor to guarantee EB-5 compliance.

To minimize immigration risk, EB-5 investors are encouraged to choose projects associated with independent, third-party regional centers that are not affiliated with the project’s developers. It’s crucial that the operator of the regional center has considerable experience and a track record of meeting all EB-5 program requirements. Ensuring accountability is essential for establishing trust, so investors should choose projects where regional centers are committed to regular updates and value transparency.

Fulfillment of Job Creation Requirements

EB-5 immigration risk is closely linked to the requirement of job creation. The EB-5 program’s core objective is to spur economic growth within the United States, particularly in rural areas or regions with higher-than-normal unemployment rates. The program gauges economic development by the amount of money invested and the number of jobs created.

For an investor to be eligible for permanent residency, a minimum investment of $800,000 is required for projects in a targeted employment area (TEA), or $1,050,000 for projects situated outside of a TEA. A TEA is designated based on rural status or high unemployment levels.

Beyond the financial commitment, the EB-5 program requires the creation of at least 10 full-time, permanent positions for U.S. workers per investor. In the case of projects sponsored by regional centers, employment numbers are calculated using economic models. For these projects, both the jobs created directly by the project and those that come from the surrounding economic activity can be considered.

Investors are advised to steer clear of projects that only aim to meet the bare minimum job creation requirement. Projects that are expected to generate a significant number of additional jobs are preferable.

According to EB-5 regulations, investing in successful projects that have already created jobs is allowed. Therefore, the safest projects for investment are those that have already surpassed the job creation requirements for all prospective EB-5 investors.

What Is Financial Risk?

Financial risk refers to any factor that could jeopardize the complete return of the capital an EB-5 investor has placed into an EB-5 project.

To minimize financial risk, it’s essential to focus on the fundamental aspect of any investment: the ability of the developer to not only complete the project and achieve financial success but also to return all the invested capital.

Certain EB-5 projects are heavily reliant on EB-5 capital for their success, and without achieving a critical level of EB-5 investment, these projects may fail. These projects have not secured alternative financing to cover all necessary expenses and may struggle to find the required funding to proceed. Such scenarios pose considerable immigration and financial risks to EB-5 investors, as a project’s inability to reach completion as intended could lead to insufficient job creation and the potential partial or total loss of the investors’ funds.

Projects that exhibit the lowest financial risk to EB-5 investors are those that have already secured enough funding to ensure the completion of the development and/or operations and do not depend on EB-5 investments for their success. In these cases, EB-5 funds serve as an alternative to more costly financing options.

Choosing Projects with Minimal Risk

EB-5 investors should carefully assess projects and only select projects that offer excellent regional center compliance, have already created enough jobs for the maximum number of EB-5 investors, and are not reliant on EB-5 capital to succeed.

EB5AN is pleased to offer several such projects.

For more information on EB5AN’s best-in-class, low-risk EB-5 projects, please schedule a free one-on-one call with our team today.