An Investor’s Guide to Navigating the EB-5 Program

What is an EB-5 Investment?

The EB-5 Immigrant Investor Program has long been hailed as one of the quickest and most straightforward routes to obtaining a U.S. Green Card. Moreover, the EB-5 visa is one of very few that offers a direct route to U.S. permanent resident status, making it popular for foreign nationals seeking a life in the United States.

The primary goal of the EB-5 program is to promote economic growth through foreign investment. EB-5 investors receive a Green Card in exchange for investing in a new commercial enterprise (NCE) in the United States.

The minimum required investment amount is $800,000, as will be further explained below.

Despite its reputation for efficiency, the EB-5 investment process is complex. An investor who attempts to navigate this process without understanding the risks jeopardizes their money and immigrant status. As such, taking steps to mitigate the risks of EB-5 investment is crucial to ensuring a smooth and successful journey to U.S. permanent residency.

In this article, we outline the types of EB-5 investment projects, the immigration process, and how to avoid common pitfalls.

Choosing the Right EB-5 Project

Selecting an EB-5 project poses one of the largest risks in the entire investment process. A project’s viability, financial stability, and compliance with program regulations will have a direct impact on the investor’s chances of obtaining a U.S. Green Card.

Therefore, it is essential to conduct proper due diligence before choosing a project. Investors must also consider the different types of investment projects and determine the kind that best suits their individual circumstances.

Regional Center Vs. Direct Investment

Prospective EB-5 applicants can choose between two different investment models: direct investment and regional center investment. Through regional center investment, EB-5 applicants invest in projects sponsored by EB-5 regional centers, which are entities designated by U.S. Citizenship and Immigration Services (USCIS) to promote economic growth through foreign investment and job creation.

Direct investors invest in an EB-5 project straightaway, without the intermediation of a regional center.

Although these two options are similar in that they both ultimately lead to the same goal — a U.S. Green Card — they have several key differences concerning job creation and investor involvement.

Job Creation

Every EB-5 investment must lead to the creation of at least ten jobs in order to qualify under program regulations, and investors that fail to generate enough employment will not qualify for U.S. permanent resident status. As such, creating (or preserving) the necessary jobs is crucial to an investor’s EB-5 immigration journey.

There are three categories of job positions relevant to EB-5 job creation: direct, indirect, and induced. Direct jobs are those created by the project itself, such as ongoing operational positions. Indirect and induced jobs are similar to each other in that they reflect the economic impact of the project.

Indirect employment is generated from the EB-5 project’s spending on goods and services from local companies, and induced jobs are created from direct employees spending their income in the local economy.

Although the direct investment model offers its own benefits, such as more control over the project, only direct positions may be counted towards the job creation requirement. ‘

Therefore, a direct investor’s project must create at least ten full-time job positions in order to meet program regulations.

This is where regional center investment offers a significant advantage over direct investment. Projects sponsored by regional centers are permitted to count direct, indirect, and induced jobs towards the job creation total, making it much easier to satisfy this requirement.

The Minimum Investment Amount

How much an EB-5 applicant must invest into a project depends on its location, and one of the most appealing aspects of the EB-5 program is the reduced investment minimum for NCEs located in targeted employment areas (TEAs). While EB-5 projects outside of TEAs require a minimum investment of $1,050,000, enterprises located in TEAs require a much lower $800,000.

TEAs are often census tracts or strings of connected census tracts that have been deemed to be in particular need of economic growth and employment. As such, EB-5 investment in TEAs offers a more affordable option to investors and benefits the U.S. government by stimulating the economy in areas that need it the most.

Conducting Proper Due Diligence

It’s crucial to carry out due diligence on potential EB-5 project options. This step ensures an investor is aware of any risks and can make an informed decision on their investment.

We strongly encourage investors to consult with experienced EB-5 immigration counsel throughout the entire EB-5 process. An immigration attorney can answer any questions, offer advice, and connect an investor with other industry professionals as needed.

The risks EB-5 investors are exposed to when selecting a project can generally be broken down into two separate categories: immigration risk and financial risk.

Immigration Risk

Immigration risk involves anything that might prevent an investor from achieving their ultimate goal of obtaining a permanent Green Card and becoming a lawful permanent resident of the United States.

To mitigate immigration risk, one must address the most common reasons EB-5 applicant petitions are denied. USCIS will deny petitions for fraud, misrepresentation, unlawful sources of EB-5 investment funds, and other deficiencies specific to an investor, such as certain criminal convictions or mental health disorders.

Investors are encouraged to seek assistance from an immigration attorney when compiling their EB-5 petitions. Doing so can ensure the necessary documentation is included and that the applicant is indeed eligible for the EB-5 visa.

However, in most cases, petition denials are caused by issues with the project or the affiliated regional center. As such, foreign nationals should thoroughly assess a regional center and its sponsored projects before making a decision.

For more information on EB-5 regional centers, read our comprehensive guide.

A good place to start is to examine the management team. EB-5 investors should evaluate projects by several criteria, including:

• The project developer’s past experience with the EB-5 program, regional center management, and more.
• The project developer’s track record of successful development.

Researching a regional center’s past projects is also advised. Investors should consider the following information:

• How many projects the regional center has sponsored.
• The number of previous EB-5 investors who have received I-526/I-526E and I-829 petition approval by investing through the regional center in question.

Investors should also consider whether the regional center has sponsored projects similar to the one they are considering for their EB-5 investment. Has the regional center collaborated with this particular EB 5 project’s developer in the past? Has it managed EB 5 projects in the same field before?

This ties into analyzing the economic viability and job creation capability of a potential project. Investors can better gauge a project’s sustainability and chance of success if they understand the market conditions, competition, and financial projections.

Financial Risk

Financial risk involves anything that might jeopardize the full repayment of the investor’s capital. Reducing financial risk involves addressing the following concerns: Will the developer successfully complete the project, achieve financial success, and return all invested EB-5 funds?

Some EB-5 projects do raise all the needed capital to cover all project costs. These projects depend on EB-5 funding to move forward, meaning they may never obtain the financing they need unless a minimum amount of EB-5 capital is invested.

Such projects pose significant immigration and financial risk because failure to complete the project as planned will likely lead to partial or total loss of EB-5 investor funds.

Therefore, the EB-5 projects with the least financial risk are those that have identified sufficient sources of capital to cover project costs and are not reliant on EB-5 funds to succeed.

Investors looking for ways to further mitigate financial risk should consider the following strategies:

• Escrow accounts: An escrow bank account is typically used to keep large amounts of money until all transactions are complete. While it is not required, many EB-5 regional centers will choose to use an escrow account to transfer their investment capital to their chosen project. An investor’s capital is held in the account until their I-526E petition is filed, at which time the capital is disbursed into the project. This provides additional protection and allows an investor to verify that a project is meeting the necessary milestones before releasing the capital.
• Exit strategy: EB-5 investors should understand what the project’s exit strategy is and whether or not it is credible. It is also important to note that there can be no guaranteed return of an investor’s capital in order to comply with the “at risk” program requirement. Thus, an investor’s best approach is to understand what the proposed exit strategy is, including potential risks and contingencies. Since there is no general standard for EB-5 exit strategies, methods will vary across projects. Investors should examine a project exit strategy with their EB-5 attorney to verify its credibility and likelihood of success.

The Immigration Process

Once an EB-5 applicant has thoroughly considered their options and chosen a project to invest in it is time to begin compiling their initial EB-5 application. Those investing through a regional center file Form I-526E. This petition demonstrates to USCIS that an applicant is eligible for the program and has made a qualifying investment.

After an investor’s I-526E petition is approved, they can apply for the initial EB-5 visa, which grants a two-year conditional residency period to the investor and their qualifying family members. If the applicant resides outside the United States this is done through consular processing.

Within the final 90 days of the two-year conditional resident period an investor must file the I-829 petition, signifying the last step in the EB-5 immigration process. Once USCIS approves this petition the investor and their family will receive permanent U.S. Green Cards and can indefinitely live, work, and study in the country.

This is merely a summarized version of the full EB-5 timeline, and there are many other aspects that investors should be aware of.

For example, each petition must be submitted with certain documentation, within certain time frames, and with the correct filing fee. Failure to satisfy any of these criteria will likely lead to a request for evidence (RFE), notice of intent to deny (NOID), or even outright petition denial. Fortunately, these issues can be easily avoided with the help of an EB-5 immigration attorney. Such counsel can assist with compiling the necessary documentation, ensuring petitions are filed on time, and keeping an investor informed and on track throughout the entire process.

Policy and Legislative Changes

Immigration policies and legislation often undergo revisions, and these changes can impact the EB-5 program and its investors. For instance, the program saw major upsets during the latter half of 2021 after Congress failed to reauthorize the EB-5 Regional Center Program. Since over 90% of all EB-5 investments are made through regional centers, many investors were left hanging in “investment limbo” and unsure of what was to come.

Fortunately, the regional center program was reauthorized in March of 2022, and investors could finally continue their immigration journeys.

This is just one example of how sudden policy changes can impact EB-5 investors. Regardless of whether an investor is compiling their initial I-526E application or their I-829 petition, it is important for all investors to stay informed and up-to-date on policy changes, program updates, and EB-5 news. As mentioned already, an EB-5 immigration attorney can and other industry experts can help investors understand the implications of policy changes and how they may be affected.

Beginning the EB-5 Investment Process

The EB-5 program offers one of the quickest and most direct routes to a permanent U.S. Green Card, making it an attractive opportunity. However, the process is not without risk. It is crucial that investors recognize and mitigate the associated dangers to best ensure a successful investment. Thorough due diligence, careful project selection, and professional guidance throughout the entire process are key to handling these risks effectively.

For more information, schedule a free consultation with EB5AN.