Starting an EB-5 Investment with a Partial Payment of Less than $800K: Weighing the Pros and Cons

When embarking on the EB-5 investment journey to secure U.S. permanent residency, prospective investors often face a crucial decision: whether to, at the time of filing an I-526E Petition, make a full investment ($800,000) or opt to start with a partial investment (less than $800,000). This choice carries significant implications, and understanding the pros and cons is essential.

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The EB-5 Investment Process in Brief

Before diving into the partial investment option, it’s crucial to grasp the basics of the EB-5 program. Investors must first select a project and then commit to the required capital investment. The minimum investment amount is $800,000 if the project falls within a Targeted Employment Area (TEA), rural, or urban region. For projects outside these areas, the minimum investment is $1.05 million. These funds are typically placed into an escrow account, safeguarding the investment prior to being deployed to the EB-5 project itself.

Full vs. Partial EB-5 Investment

In the EB-5 landscape, two primary investment structures exist: full and partial investments.

Full EB-5 Investment: This requires EB-5 investors to disburse the entire capital amount upfront. This approach satisfies EB-5 program requirements by demonstrating that the investment is fully committed from the start.

Partial EB-5 Investment: Partial investments involve contributing a specific portion of the required capital, often around half, and committing to providing the remaining amount within a predefined timeframe. This option also complies with EB-5 program criteria, as it signifies that the investment is “in the process of being made.”

Evolution of Partial EB-5 Investment

Historically, prior to the EB-5 Reform and Integrity Act of 2022 (RIA), full payment at the time of I-526 petition submission was the norm. This was because of concerns that investors might change their minds midway through the EB-5 immigration process.

However, partial investments gained traction, especially among investors filing before the June 30, 2021, deadline (renewed in March 2022 with RIA). This allowed them to secure a lower investment amount or protect their children from aging out. Even after RIA, partial investments remain a viable option because of the $800,000 investment threshold and the limited liquidity potential many investors face.

Advantages of Partial EB-5 Investment

Partial EB-5 investment offers several advantages:

Priority Date: Investors can secure an early priority date while gaining additional time to complete the full investment.

Flexibility: It allows investors to liquidate assets like stocks or real estate at favorable terms rather than selling at a loss or below-market prices.

Timing Alignment: Investors expecting funds from asset sales on specific dates (i.e. restricted stock units with blackout dates) can use partial payments to match their investment with those timelines.

Risk Mitigation: In uncertain economic climates or with volatile financial markets, partial investments provide an element of risk mitigation.

Partial EB-5 Investment Abroad

Partial payment structures are also gaining popularity in countries like China, where visa backlogs and stricter foreign currency controls have made EB-5 less attractive. For Indian investors, partial investments can help overcome the $250,000 transfer limit per financial year.

Success Factors and Compliance

RIA mandates that investors provide documentation proving the source of funds and the active initiation of the investment. This legal acceptance adds appeal to partial investments, although it necessitates substantial evidence of intent and commitment to the process.

Evidence may include bank statements, purchase agreements, property transfers, stock transfers, loan agreements, and more. Inadequate evidence can cause USCIS requests for additional documentation.

Challenges and Caution

Despite the advantages, uncertainties and risks surround partial EB-5 investments:

USCIS Clarity: USCIS adjudication policy on payment in installments is not entirely clear. Investors must navigate this uncertainty with due diligence.

Investor Support: Investors often require support and flexibility from developers and regional centers to pursue partial payments, which may not always be readily available.

Sustainment Period: The two-year sustainment period for investors won’t begin until the final payment is made and spent by the EB-5 project, potentially increasing the risk of an EB-5 investor’s funds being redeployed.

Conservative Approach: Many EB-5 investors are risk averse and may shy away from partial investments, fearing complications with USCIS and possible denials, especially if source of funds (SOF) issues are complex.

In conclusion, partial EB-5 investments offer strategic advantages for investors, but they must carefully assess the associated risks and compliance requirements. Each investor’s circumstances and risk tolerance will determine whether this payment option aligns with their goals in pursuing the EB-5 program. A well-informed decision regarding partial investment can be a pivotal step towards securing a U.S. investor visa and achieving long-term financial and immigration goals.