What Are the Risks Direct EB-5 Investments Carry After the RIA?

When it comes to the EB-5 visa program, investors have two main options: the regional center route and the direct investment route. Compared with the regional centers, direct investment has always carried more responsibility because investors must personally manage or closely monitor the business.

In 2022, the EB-5 Reform and Integrity Act (RIA) became law and offered more protection to investors in regional center projects. However, direct investments did not get the same updates. In fact, they now face more pressure than ever.

In this article, we will explain how the RIA changed the EB-5 landscape and the key risks of direct EB-5 investments.

What Did the RIA Change?

The EB-5 Reform and Integrity Act of 2022 was designed to improve oversight and restore trust in the EB-5 program. For years, investors faced risks tied to fraud, weak oversight, and poor project results. While the RIA addressed many of these concerns, its changes mostly focused on regional center investments.

Here are the key changes under the RIA:

• Stronger government oversight: Regional centers now face more reporting rules and must submit annual statements. These documents must show how funds are used and how jobs are created.
• Independent fund administration: Regional centers must use a third-party fund administrator. This rule helps prevent the misuse of investors’ money.
• Visa set-asides: The RIA reserved set-aside visas for rural, high-unemployment, and infrastructure projects. These projects now move faster through the EB-5 pipeline, making them more attractive.
• Job creation timeline: The RIA clarified when job creation must occur and gave investors a clearer window to meet requirements.
• Investor protections: If a regional center shuts down or loses approval, the law protects existing investors. They do not lose their visa process if the shutdown is not their fault.

Key Risks of Direct EB-5 Investments Post-RIA

While the changes brought in by the RIA benefit regional center investors, direct investors do not enjoy the same level of support. Below are the key risks of making a direct EB-5 investment after the RIA:

1. Job Creation Risk

The core rule of the EB-5 program remains the same: the investment must create 10 full-time jobs for U.S. workers. In a direct investment, those jobs must be:

• W-2 employees.
• Working at least 35 hours per week.
• Hired directly by the new commercial enterprise.

You cannot count indirect jobs like those in construction, supply chains, or nearby services because every job must be directly tied to your business. If your company does not hire enough qualified employees before your I-829 filing, you risk denial.

2. Increased Compliance and Documentation Requirements

Direct investors must now follow more rules and prepare more documents. This includes:

• Detailed business plans
• Full job creation models
• Payroll records
• Tax returns
• Operating agreements

You must prove that your investment is legitimate, that it remains at risk, and that it meets the job creation rules. You must also show that your business operates legally and follows all local and federal laws.

While regional center projects must file annual statements under the RIA, direct investors do not have that structure. You must handle your own compliance, and if you miss a detail, your petition could be denied.

3. Business Viability and Operational Risks

A direct EB-5 investment often means you are launching or funding a small business, which must succeed if you want to get your Green Card. However, small businesses face many challenges, like unclear market demand, cash flow problems, high competition, and labor shortages.

Furthermore, you are investing in a business and managing immigration goals at the same time. If the business closes or underperforms, your Green Card is at risk, as there is no backup plan.

4. Financial Risk and Capital Return

EB-5 law requires that your investment remain at risk, meaning you cannot receive any guarantee that you will get your money back. While this applies to both regional centers and direct investments, the latter faces more capital risk because investors often put all their money into one small business.

There are limited exit strategies, so if your business fails, your capital may be gone. Also, you cannot sell your stake until job creation is proven and the investment term ends. Since most small businesses do not have buyers waiting to purchase investor shares, you could be tied to a failing business for longer than expected.

5. Source-of-Funds Verification Challenges

USCIS requires all EB-5 investors to prove that their money comes from legal sources. As such, you must show how you earned the funds, how the funds moved to the U.S., and that the funds belonged to you or were a lawful gift.

In direct investments, the source and path of funds reviews have become more intense. Because you play an active role in the business, the U.S. government may take a closer look at both your investment and your financial background.

Partner With EB5AN to Invest in Safe Regional Center Projects

While the EB-5 program remains an appealing pathway to U.S. residency, direct investments carry significant risks. This is why almost all EB-5 applicants invest in regional centers, where the risks are more evenly distributed, and the burden of compliance and job creation is often managed by professionals.

If you’re looking for a more secure path to U.S. residency through the EB-5 program, consider partnering with EB5AN. We’ve already helped more than 2,300 families from over 70 countries achieve permanent residency in the United States, and we’d be happy to guide you next.

Book a free call with our expert team today to gain access to top-quality, USCIS-approved EB-5 projects.