A step-by-step guide for business owners

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EB-5 investing benefits the U.S. economy, regions in need of investment, business leaders, and EB-5 investors. The primary goal of the EB-5 program is to create jobs for American workers through foreign investment. In exchange, EB-5 investors qualify for U.S. permanent residency and U.S. citizenship if desired. For entrepreneurs, EB-5 investments are a source of financing at below market rates.

Following the end of the Regional Center program on June 30, 2021, only Direct Investment EB-5 is available. This simply means that each EB-5 investor must invest directly in a project or entity that will create 10 jobs from that investment. To access this source of capital for your next project, follow these five steps.

Related: Is EB-5 Regional Center Funding the Right Investment for You?

1. Hire the right EB-5 professionals

Although the requirements of the EB-5 program seem quite simple, they are more complex than many people realize. You can try to get the EB-5 capital yourself, but relying on professional EB-5 partners makes the process much simpler and faster. You may need to consult with several legal professionals to ensure that you know everything you need to know about the immigration, tax, and securities implications of using EB-5 capital. Other helpful professionals on the EB-5 include accountants, consultants, and business plan writers.

2. Evaluate the suitability of the project for direct investment EB-5

The needs and characteristics of your project determine whether it is suitable for an EB-5 direct investment. Each EB-5 investor’s investment must create 10 new full-time, salaried jobs for American workers for at least two years. Therefore, your project must be able to create 10 jobs per investor. Small projects or businesses are generally better suited for direct EB-5 investments because they require less capital and can accommodate a limited number of investors. Thus, it is also important to determine the percentage of project capital you need to source from the EB-5 investment.

To ensure investors’ I-526 petitions are approved, your business plan should include a concrete and plausible plan that shows how the required jobs will be created. The business plan should conform to the requirements in Ho’s question, so work with a business plan writer with EB-5 experience.

To qualify for permanent residence in the United States, an EB-5 investor’s investment must also remain invested and at risk until the investor has held conditional permanent residence for at least two years. In this context, “at risk” means that the investor can enjoy gains or suffer losses – neither condition is guaranteed. If the investor does not meet this requirement, they are no longer eligible for residency based on the EB-5 program, so the project must allow investors to meet this requirement.

Related: How to Build Trust with EB-5 Investors

3. Make sure the project is structured to accept EB-5 direct investments

With regional center investments, which are not currently available, EB-5 capital is structured as a loan or equity in the New Business Enterprise (NCE). The NCE then invests or lends the capital to the job-creating entity (JCE). With EB-5 direct investments, the investor must invest directly in the entity that will create the jobs, and all investments must be equity investments.

4. Effectively Market the EB-5 Project

The first step in the marketing process is to develop a market strategy specific to the target market. Potential investors in different parts of the world have different expectations when evaluating an investment opportunity, so marketing materials should meet those expectations. Marketing materials should include a website with renders and videos describing the project and printed materials such as brochures. Online and in-person seminars are also helpful. Marketing materials must be available in the language spoken by the target audience, and translations must be accurate to avoid misrepresentation, which can have serious legal consequences.

Foreign migration agents are an equally valuable marketing tool. However, be sure that any agents you rely on comply with local and US securities regulations and fully understand the project offering. As with translations, misrepresentation can have legal repercussions.

5. Reduce financial and immigration risks for EB-5 investors

An investor’s EB-5 investment should remain at risk, but risk refers to the possibility of gain or loss. Financial risk relates to the risk associated with the return of the investment at the end of the investment term and if the I-526 petition is denied; immigration risk refers to the risk of obtaining a green card. Investors seek EB-5 projects with the lowest possible financial and immigration risk.

You can reduce financial risk and provide peace of mind by using an escrow structure to release EB-5 funds for the project. In this scenario, the investment funds are blocked and released to the JCE upon approval of the I-526. The return of funds in the event of an I-526 denial must be clearly stated in the project documents.

Having a clear plan for job creation reduces the risk of immigration. It’s best to include a job cushion, which simply means hiring fewer investors than the job creation forecast allows. In other words, if your project is likely to create 50 jobs, hiring five investors increases the risk of immigration because you are not guaranteed to create 50 jobs, or 10 jobs per investor. However, if you take three investors, the projected job creation becomes 16.6 jobs per investor, thus adding a cushion. Finally, be sure to track job creation and project expenses from the outset to ensure the required evidence is available to investors when it comes time to complete the EB-5 permanent residency process.

Related: Direct EB-5 Capital: A Valuable Opportunity for Business Leaders

Due to the complexity of the EB-5 requirements, your first stop should be an experienced EB-5 immigration attorney, who will be able to advise you on program details, what help you need, and what steps to take. to find capital. Structure your EB-5 project so that you and your EB-5 investors can achieve your goals while benefiting the American economy, American workers, and the local community.

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