Discover the basics of repayment and redeployment in EB-5 projects.
Ensure Investment Success
The EB-5 program, hailed as one of the quickest and most straightforward routes to U.S. permanent residency, is not without risk. The entire process takes several years to complete, and investors run the risk of losing some or all of their invested capital.
Thus, a crucial step in the EB-5 investment process is conducting thorough due diligence on projects and regional centers before moving forward.
Doing so reduces an investor’s exposure to financial and immigration risk and best ensures investment success.
One component of proper due diligence is examining a regional center’s track record, particularly when it comes to the repayment of investor funds.
A regional center’s repayment history is a valuable reference for investors seeking a reputable firm; it demonstrates a regional center’s experience with managing each step of the EB-5 investment process.
By choosing the right regional center, EB-5 applicants strengthen their chances of obtaining U.S. permanent residency and the full return on their invested capital.
How Does Repayment Work?
One of the main requirements of all EB-5 projects is that the invested capital must remain “at-risk” until the end of their two-year conditional residency period, meaning the investor has a chance for financial gain as well as partial or complete financial loss. Therefore, an EB-5 investment will not qualify under program regulations if there is a contractual right to repayment.
The terms of repayment are governed by the project’s exit strategy, which is typically included in the offering documents and business plan.
Exit strategies vary between projects. EB-5 applicants should consult an EB-5 immigration attorney when reviewing such documentation to ensure they fully understand the terms before entering an agreement.
The Difference Between Repayment and Redeployment of EB-5 Funds
Through the process of regional center investment, the regional center serves as the new commercial enterprise (NCE) and loans investment funds to a separate entity responsible for job creation, known as a job-creating entity (JCE). The JCE is the EB-5 project.
At the end of the loan term, the project repays the loan, and the regional center returns an investor’s capital.
As mentioned above, EB-5 investment funds must remain “sustained” and “at-risk” for the duration of the investor’s conditional residency period. Traditionally, loan terms of five years have satisfied this requirement and provided enough time for an investor to file and receive approval of their I-526E petition, live in the United States for two years as a conditional resident, and file the I-829 petition.
Complications can arise, however, when slower processing times and restricted visa availability lengthen the processing time for Form I-526E. In these cases, increased wait times render these loan terms insufficient and create a risk for the investor. The funds must still be invested at the time the investor finishes their two-year conditional residency and files the I-829 petition.
Redeployment offers a potential solution to this issue. It allows the NCE to redeploy the repaid funds into other job-creating projects. In essence, redeployment simply allows investors to continue to meet EB-5 requirements in cases where the loan is repaid to the regional center before the end of conditional residence.
Protecting Your EB-5 Investment Funds
Safeguarding your EB-5 investment requires a careful review of regional centers, especially their repayment history. This track record can serve as a reliable indicator of the center’s management skills and can reduce both financial and immigration risks.
Beyond understanding repayment terms, investors should also be familiar with redeployment strategies to ensure their investment stays “at-risk” throughout the period. By taking these steps, EB-5 applicants can significantly boost their chances of successfully obtaining U.S. permanent residency while also recovering their initial investment.
For more information on how to get an EB-5 Green Card, schedule a free consultation with EB5AN.