Is Regional Center EB-5 Funding the Right Investment for You?
The EB-5 Investment Program attracts foreign capital, fuels innovation-driven immigration and is a boon to the U.S. economy as a whole, but it's vital first to know if and how you qualify.
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Since its creation in 1990, the EB-5 Immigrant Investor Program has grown in popularity among foreign investors and business leaders alike. Under it, foreign nationals can be awarded U.S. Green Cards (aka Permanent Resident Cards) in exchange for investing in qualifying projects — encouraging immigration while strengthening the national economy. To qualify, every EB-5 investment must remain at risk, and create at least 10 full-time jobs for U.S. workers. (If an investor does not fulfill these requirements, he or she will be ineligible for permanent resident status.) In addition, investors must choose between two models: direct and regional center investment. The latter is by far the more common; according to an August 2021 report by Invest in the USA, more than 93% of all EB-5 visa petitions have been linked to regional center projects.
Overview of regional center EB-5 investment
Regional centers are United States Citizenship and Immigration Services (USCIS)-designated service agents for EB-5 investors and developers. These agencies manage EB-5 investment capital to promote economic growth and reduce unemployment. (Due to the expiration of the EB-5 Regional Center Program in June 2021, regional center investment is currently on hold and has not been revalidated as of November, 2021. However, industry experts expect this lapse to be temporary.)
When an EB-5 investment is made through a regional center, the investor buys equity in an investment fund managed by that regional center. The capital is then loaned to the job-creating entity (JCE) or used to acquire equity in it. Finally, the JCE deploys the funds into the EB-5 project, which uses the capital to create jobs.
One of the main reasons behind the popularity of regional center investment is its flexible job creation criteria; its investors are permitted to include direct, indirect and induced employment in such calculations. Directly created jobs are listed on the EB-5 project's payroll, but figures can also include indirect and induced employment from expenditures made by the project and its employees.
In contrast to the regional center model, direct EB-5 projects can count only direct jobs, thus making it more difficult for their investors to generate at least 10 full-time positions. Moreover, direct EB-5 investment funds are injected straight into a new commercial enterprise without the intermediacy of a regional center.
Requirements for EB-5 regional center projects
Regional center EB-5 capital can be a viable source of funding, but project developers must fulfill the following criteria to qualify for an associated investment:
- Regional center coverage. EB-5 regional centers are allowed to operate only within geographic areas delineated by USCIS, so the project must be located within the coverage area of its regional center. USCIS may, however, allow regional centers to expand their coverage temporarily.
- Potential for job creation. When evaluating EB-5 investment opportunities, foreign investors place great importance on a project's potential for creating jobs. The most popular aim is to exceed the minimum of 10 per investor, which increases their chances of receiving Green Cards, but all projections regarding employment creation must be supported by a credible economic impact study in the project's business plan.
- A suitable project type. The regional center model is a better match for large EB-5 projects that can create numerous jobs and take on many investors. Real estate developments, for example, are particularly well-suited for regional center investment. Conversely, smaller businesses may find it beneficial to choose the direct investment route.
- Compliance with regulations. The more closely a project follows EB-5 program guidelines, the more popular it will be among investors. For example, projects must comply with the at-risk requirement, which means that investors must be subject to either gains or losses and cannot possess a contractual right to repayment.
Many projects have benefitted from regional center EB-5 funding, and business leaders who can fulfill the above criteria should consider participating; doing so will provide them with a welcome source of capital while contributing to the overall economic growth of the United States.