How to Decrease the Risk of EB-5 Project Delays

The EB-5 program currently provides one of the fastest routes for foreign nationals to become U.S. permanent residents. This program grants permanent resident status to foreign investors in exchange for a substantial investment in a qualifying project that contributes to boosting the U.S. economy.

Despite sharing some similarities, EB-5 investments differ from regular securities investments. EB-5 projects are complex and may be prone to unforeseen delays that can cause financial and immigration losses. While risk is essential to the EB-5 process, the risk of EB-5 project delays is usually avoidable.

In this article, we’ll look at some of the causes of EB-5 project delays and how to decrease the risk of such delays impacting your investment.

What Causes EB-5 Project Delays?

The EB-5 process is inherently complex, and EB-5 projects sometimes experience delays in their development and completion. When there is an EB-5 project delay, the project may fail to create the required jobs within the stipulated time frame. Should this happen, your immigration status may be jeopardized.

Below are some of the causes of EB-5 project delays that you should look out for.

Insufficient Funding

Adequate funding is essential to the success of an EB-5 project. If an EB-5 project fails to raise the required capital for financing the project, there may be significant delays in project construction.

Insufficient funds or poor capitalization usually occur when a project is unable to secure financing from senior lenders and the developer does not have sufficient equity to finance the project. In response, the project relies on EB-5 investors for financing. If such a project cannot get enough EB-5 investments, it may experience delays and even fail, and existing investors may lose their funds and immigration status as a result.

To safeguard your investment and immigration, it’s crucial to thoroughly analyze a project’s financials to ensure it is fully capitalized before investing. You can accomplish this by analyzing the developer’s financial statements and business plan. Your chosen regional center should also be able—and willing—to provide you with the necessary details.

Difficulty Securing Required Documents

EB-5 projects are often large real estate developments that require extensive government approvals. Some developers do not secure all the necessary approvals before commencing development. Instead, they may obtain only a few permits, allowing them to start construction with the hope of getting the remaining approvals along the line.

If they fail to secure the required permits within a certain time frame, however, they may be forced to pause project development until they get the needed approval—which isn’t a guarantee. This can be a brief pause or a long one depending on various factors, such as administrative complexities and bureaucratic response times.

To avoid such a delay, investors are advised to analyze the project’s documentation and confirm that they’ve gotten all necessary permits and approvals before investing.

Mismanagement

EB-5 project leaders can sometimes mismanage projects. This mismanagement may be due to poor planning, deviation from the project plan, or poor finance management. Such poor management practices can cause significant disruption in the project timeline, resulting in project delays and even failure.

This is why assessing the regional center and the project developer’s reputation and history is essential. Check the background of the regional center’s management team and their track record even before joining or establishing the regional center. In particular, make sure they have experience in the industry and that they’ve been successful working on similar projects in the past.

Avoiding EB-5 Project Delays Starts With Selecting the Right Project

The success of your EB-5 journey heavily depends on the quality of the EB-5 project you choose. Any EB-5 project delays will significantly impact your ability to meet the requirements for your Green Card—most notably the job creation requirement—and your ability to get your money back.

The best way to avoid delays is by selecting a strong EB-5 project from the start. There are specific qualities that can give you insight into the strength of an EB-5 project. We’ll discuss some of these qualities in the next section.

Things to Look for When Selecting an EB-5 Project

Full Capitalization

Look out for projects that have secured all the required funding to finance the project’s development without depending solely on EB-5 investors. Check for the presence of a senior loan from traditional lenders—a project with a senior loan is more likely to be fully capitalized and less likely to experience delays. Plus, a project with a loan from a traditional lender means that the lender has already examined the project and deemed it secure enough to invest in themselves.

Ongoing Construction

A project already being developed is less likely to face delays than one still in the planning stage. An EB-5 project under construction is already creating jobs, which is one of the key requirements for an EB-5 Green Card. Ongoing construction also indicates that the project has sufficient financing and can be completed without your EB-5 investment, meaning you’ll be much more likely to achieve immigration success and get your funds back.

Profitability

A project already turning in profit while still under construction is less likely to experience delays, as the generated profit can be re-injected into the project as additional financing. Unlike most commercial projects, residential projects often become profitable while still under construction because units can be built and sold before construction on other units is finished.

Consequences of EB-5 Project Delays

How an EB-5 project delay affects you depends on where you are in the EB-5 process. The consequences of EB-5 project delays differ for investors who have filed Form I-829 and those who have yet to meet the conditions for filing this form.

The damage is less when a project is experiencing completion delays but has created the required jobs and you’ve already filed Form I-829. In such a situation, a delay in project completion may not significantly affect you, provided you met all the requirements for removal of Green Card conditions. However, it may still affect your ability to get your capital back.

The consequences of project delays are particularly far-reaching when a project encounters delays before you complete the two-year conditional permanent residency and your investment has not met the job creation requirement. In such a scenario, you may be unable to qualify for a permanent Green Card and may also lose your investment funds.

You’ll need to take proactive steps to make sure this doesn’t happen to you.

What to Do if an EB-5 Project Encounters Delays

Any essential project quality you ignore during the due diligence process can potentially result in project delays, creating immigration and financial problems. Even with thorough due diligence, there are rare occasions when an unforeseen circumstance can cause delays.

Specific actions can help avoid or mitigate the resulting damages if you find yourself in such a situation. For example, where there is evidence that an EB-5 project delay is caused by mismanagement, investors may sue the regional center or developer on their own or via a class action. However, such a lawsuit may be costly with no guarantee of success.

Additionally, a new provision under the EB-5 Reform and Integrity Act of 2022 (RIA) provides a means for good-faith EB-5 investors to maintain their eligibility if a project experiences prolonged delays or failure.

The steps you should take in cases like these depend on where you are in the EB-5 process and the cause of the delay, so it’s best to seek help from a knowledgeable immigration attorney and experienced EB-5 professionals.

Enjoy a Low-Risk Investment With EB5AN

EB-5 project delays can cause both immigration and financial issues for investors. The best solution to EB-5 project delays is to avoid them in the first place. You can do so by investing in strong projects managed by reputable regional centers.

EB5AN leads the industry in transparency and honest practices. We work with reputable and well-capitalized developers to offer strong, low-risk projects to our investors.

To learn more about our EB-5 projects and get help selecting the best option for your situation, book a free one-on-one call with our EB-5 experts today.