Why an EB-5 Investment’s Duration Is Critical

The EB-5 program has long been a win-win opportunity for foreign investors seeking permanent residency in the United States and for U.S. businesses in need of capital.

The program provides investors a unique opportunity to secure permanent U.S. residency and eventual citizenship through capital investment while also offering them potential financial returns. For the U.S. economy, EB-5 investments mean billions of dollars in new capital and the creation of thousands of jobs, particularly in regions that require an economic boost.

Most EB-5 investments are channeled through government-approved regional centers, which specifically focus on projects in designated targeted employment areas (TEAs) to benefit underserved communities in rural and high‑unemployment regions.

Regional center EB-5 investments often fund major real estate projects, typically structured as loans with an investment period of 5 to 7 years. In recent years, short-duration investments lasting 3 to 4 years have also become increasingly common, especially in urban areas, attracting investors with early repayment options. However, the quick exit strategy of a short-term offering may not necessarily align with realistic job creation and project execution timelines, presenting significant immigration and financial risk to investors.

In this article, we will explore why investment duration is one of the most critical aspects of an EB-5 offering. We will also explain why investors should carefully evaluate the repayment schedule of an offering and find a balance between liquidity and risk exposure based on their individual goals.

Understanding an EB-5 Investment

There are three essential requirements for a qualifying EB-5 investment:

– The applicant must make a minimum investment of $800,000 in a TEA project or $1,050,000 if the project is located elsewhere.

– The investment must create at least 10 full-time jobs for qualifying U.S. workers.

– The capital must stay invested “at risk” for at least two years, i.e., it must remain exposed to the possibility of profit or loss with no guaranteed returns.

In a regional center investment, multiple EB-5 investors put in their funds in a new commercial enterprise (NCE), which then invests the EB-5 capital on behalf of investors into a job-creating entity (JCE) in the form of loans or equity. EB-5 regulations require that the full capital of an investor must be deployed in the project, and it must remain “at risk” for a minimum sustainment period.

Before the EB-5 Reform and Integrity Act of 2022 (RIA) was passed in March 2022, the sustainment period was mandated to last until the end of an investor’s two-year conditional residence period. The requirement still applies to pre-RIA investors.

For investors filing their petitions post-RIA, the new law reduced the minimum sustainment period to just two years from the date the investor funds are placed “at risk” and are deployed to the JCE. This means that as long as 10 jobs have been created by an EB-5 investment, the investor can be repaid after two years and still remain eligible for a U.S. Green Card.

As a direct outcome of the reduced sustainment period requirement, there was a surge in short-term EB-5 projects offering quick capital repayment and increased liquidity to investors.

However, such EB-5 investments may also involve additional risk factors that investors need to be aware of, as discussed further in this article.

Why Investment Duration Is Important for Investors

Every project has a unique development timeline determined by its nature, size, and complexity. For instance, real estate developments and technology startups will have vastly different stages of construction, job creation, and revenue generation.

An investment duration that is too short relative to the project’s lifecycle may require additional financing or cause a delay in the repayment of EB-5 funds, increasing financial risk for investors or even jeopardizing their investment.

Long-Term Investments

Long-term EB-5 projects generally require EB-5 funds to remain invested as loans for five years or longer before repayment. These projects are usually large-scale developments—such as major real estate ventures or infrastructure projects—that require significant time for construction, stabilization, and sufficient job creation.

Traditionally, long-term projects are considered the safest in the EB-5 market as they are often associated with established developers who have secured sufficient financing in the form of senior bank loans or developer equity. They do not rely on EB-5 funding for capital, which makes up only a small portion of the project’s financial structure. With multiple financing layers, such projects are more likely to be executed as planned and repay investor capital.

Because these projects have an extended timeline, they tend to focus on creating sustainable, long-term employment opportunities to meet the job creation requirement that is at the core of the EB-5 program.

While long-term projects tend to be stable, they could nevertheless expose investors to market fluctuations and regulatory changes if they get delayed.

Short-Term Investments

Short-term EB-5 investments typically offer an early return of capital—often within two to four years after the funds have been deployed to the project. They are frequently marketed on the promise of a fast exit strategy and attract investors who prefer having quicker access to their funds.

Short-term projects are likely to have high-risk financial structures without the backing of traditional funding sources and may be heavily dependent on EB-5 funds for execution, which could prove risky in the long run.

If the actual timeline for project completion turns out to be longer than anticipated, the project will require refinancing or an extension of the investment duration. This will cause additional uncertainty and delay for investors as an ongoing project is unlikely to repay its investors until it starts generating revenue.

In short-duration investments, there is often the risk that the accelerated timeline does not allow sufficient time for the project to create the requisite number of jobs. If investors are repaid without their investment creating adequate jobs, they will not qualify for the removal of conditions on the Green Card.

Ideally, a project’s investment duration must be such that the EB-5 funds remain invested long enough to satisfy the job creation criteria of the program and the project generates sufficient profit for repayment of capital.

In a competitive EB-5 market filled with promises, the onus is on the investor to distinguish between optimistic projections and achievable reality.

Redeployment Risk

Redeployment occurs when an investor’s capital needs to be reinvested into another project because the initial EB-5 project has repaid the loan, but the investor has not completed the required sustainment period. Although necessary to fulfill the “at risk” criteria of the program, redeployment poses an added risk for investors due to the lack of transparency and control in the redeployment process.

An ongoing IIUSA lawsuit challenging the new two-year sustainment period has brought renewed attention to the importance of investment durations and the risks investors face due to redeployment if their funds are repaid prematurely.

In the lawsuit, IIUSA has contended that a two-year sustainment period is insufficient for ensuring safe and feasible EB-5 investments and has instead advocated for a minimum five-year requirement. The association maintains that shortening the sustainment period to just two years could compromise the program’s integrity by promoting unviable short-term projects that may pose significant risks to investors.

According to IIUSA, such projects could not only jeopardize investor interest but also fall short of the EB-5 program’s fundamental goal of maximizing job creation.

The outcome of the lawsuit is awaited, but if the policy reverts to the original pre-RIA regulation or longer, EB-5 investors in short-term loan projects will face serious redeployment risk to meet the sustainment period requirement until they complete their conditional residency.

Considering the risks of investments with an overly ambitious duration, investors are advised to select safe projects with at least a four-year investment timeline that would quite likely limit the need for redeployment.

Contact EB5AN to Select a Reliable EB-5 Investment

The duration of an EB-5 investment is more than just a timeline—it is a critical component of the investment’s risk profile, financial structure, and overall feasibility. It is crucial for investors to select an investment with a reasonable duration that not only safeguards their capital but also ensures that the project can meet its job creation and profitability objectives.

To avoid falling for risky EB-5 investments, investors are advised to conduct thorough due diligence and seek advice from expert EB-5 professionals.

EB5AN, a leading EB-5 firm, specializes in guiding investors through the EB-5 process and providing them with safe and transparent investment opportunities. We have helped more than 2,300 families from 70+ countries relocate to the United States as lawful permanent residents. Our expert team has over a decade of experience, and we offer our clients first-rate, low-risk EB-5 regional center projects with a 100% USCIS project approval rate to date.

If you’d like to know more about the EB-5 investment timelines, feel free to book a one-on-one call with our team today.