The 5 Best Markets for Raising EB-5 Investment Funds
Learn why the five largest EB-5 markets, particularly mainland China, are ideal for U.S. business owners seeking investment funding.
Investment funding offered through the EB-5 Immigrant Investor Program has proven to be a remarkably convenient source of capital for numerous U.S. businesses. Often available at below-market rates, EB-5 investment capital benefits the U.S. economy and reduces unemployment.
However, businesses interested in raising funds from EB-5 investors must be careful to follow United States Citizenship and Immigration Services (USCIS) guidelines. Creating a USCIS-compliant business and sourcing investment capital requires professional execution and typically takes several years. Therefore, business leaders should strive to become familiar with the EB-5 investment industry and identify the most suitable target markets for their offerings.
In general, well-established EB-5 markets are the most promising for U.S. businesses. Potential investors from these markets are often familiar with the EB-5 industry, and demand among these foreign nationals is high. Moreover, the largest EB-5 markets have well-established broker-dealer networks, which make it easier for U.S. businesses to carry out the marketing process.
Department of State (DOS) statistics from the 2016 to 2020 fiscal years show that the five largest EB-5 markets are mainland China, India, Vietnam, South Korea and Brazil. U.S. businesses would do well to examine these markets and learn about each one's unique characteristics. (All of the following percentages reflecting the market size of each country were calculated using DOS statistics.)
In recent years, Brazil has emerged as a major EB-5 market. According to the Credit Suisse Research Institute, Brazil had an impressive 259,000 high-net-worth individuals (HNWIs) in 2019. (An individual is considered to have a high net worth if they own at least $1,000,000 in liquid financial assets.) Even though this number has since fallen due to the economic consequences of the Covid-19 pandemic, it will likely increase as the pandemic draws to a close. Notably, Brazil is the only South American country within the top five EB-5 markets; more than 80% of all EB-5 visas have been issued to Asian investors while South American nationals have received only between 4.4% and 8.3%.
In the 2016, 2017, 2018, 2019 and 2020 fiscal years, Brazil's shares of the total number of EB-5 visas were 1.5%, 2.8%, 4%, 5.2% and 2.6%, respectively.
4. South Korea
According to the Pew Research Center, the South Korean population in the United States amounted to 1,908,000 in 2019. As a result of this large diaspora, South Korean nationals may be interested in reuniting with family and friends in the United States. South Korean investors accounted for 4.2% of the EB-5 visas issued in FY2020, which represents a decrease of 3.1% when compared to FY2019. Delays in visa processing caused by Covid-19 likely account for this downturn.
Vietnam's economy is growing rapidly, even when compared to Asian powerhouses such as China and Taiwan. According to World Bank data, Vietnam experienced an impressive GDP growth rate of 2.9% in 2020.
In FY2020, Vietnam received a substantial 12.7% of the EB-5 visas. The country's share of the EB-5 visa pool increased by 5.5% when compared to FY2018, when Vietnamese investors received only 7.2.%.
India experienced a pronounced economic boom in the 2010s; the number of Indian HNWIs grew by 63% from 2010 to 2020. As of 2020, there were 698,000 HNWIs in the country. Similarly, India's share in the EB-5 visa pool grew from only 1.5% in FY2016 to 17% in FY2020.
1. Mainland China
Mainland China has long been a leading market in the EB-5 investment industry. In fact, Chinese investors received the largest share of EB-5 visas from FY2016 to FY2020, even obtaining 75% of the visa pool in FY2017. In FY2020, China's visa share decreased to 46.9%, but the country remains the largest EB-5 market.
In a positive turn of events, the DOS cleared a long-standing processing backlog for Chinese direct EB-5 investors in December 2021. This action was partly taken due to the June 2021 expiration of the EB-5 Regional Center Program. Since the regional center model had been the most popular EB-5 investment option, there is now increased processing capacity to adjudicate visa petitions from direct investors.
Direct investors from China can now go through the EB-5 process without being subject to the processing delays imposed on backlogged countries. It may thus be advisable for direct EB-5 businesses to actively market their offerings to Chinese nationals. As the best-established market in the EB-5 industry, China already possesses a robust network of EB-5 professionals, including experienced broker-dealers.
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