How might all of an investor’s funds fulfill the “at risk” requirement if only a portion of the investment is needed to start the new commercial enterprise (NCE)?

Investors must meet the minimum investment threshold for a direct EB-5 project. As of March 2022, the EB-5 Reform and Integrity Act of 2022 increased that amount is $800,000 for projects in a target employment area (TEA) and $1,050,000 for projects outside of TEAs. If an investor can start a new commercial enterprise (NCE) with less than the minimum amount, the remaining amount that is not invested directly must be put in an operating account for the NCE. For example, if a direct EB-5 investor can start a business in a TEA with $500,000, the remaining $300,000 should be placed in the NCE’s account as capital that will be used for the business’s operations.

The term “at risk” implies that investors should put their money in projects that are actually risky. In reality, the name of this requirement refers to the risk of financial loss and the opportunity for financial gain that an EB-5 investment project must have. In other words, it must be possible for the investor to experience a financial loss, just as much as it is possible for them to experience a financial gain. Investors must make their investment prior to filing Form I-526 and include evidence to support that their funds meet the United States Citizenship and Immigration Services (USCIS) at-risk eligibility requirement.

The at-risk requirement also varies by form. For example, Form I-829, the final step before foreign investors are granted permanent residency in the United States, requires that investors demonstrate that their funds have been at risk for the entire duration of their conditional U.S. permanent residency, a period of at least two years.

When considering a direct EB-5 offering, investors would be wise to conduct their due diligence to ensure that the project meets the at-risk requirement. Some things to keep in mind are clear evidence of the potential financial loss and gain, a guaranteed rate of return, and a business plan that clearly details how the EB-5 investment capital will be used.