Project developers are increasingly noticing EB-5 financing is becoming a very popular alternative to traditional methods of financing.
In 1990, Congress developed the EB-5 Program to boost the U.S. economy through foreign capital investment and job creation. EB-5 applicants invest $1,000,000 into the standard EB-5 Program, or $500,000 if the investment is in a targeted employee area (TEA).
After the initial investment into an EB-5 project, applicants have two years to prove the project created or is scheduled to create 10 jobs for qualified U.S. workers. Through the EB-5 program, applicants and their family (spouse and unmarried children under the age of 21) may qualify for green cards.
EB-5 financing is a low cost alternate to traditional financing. The capital can be released through escrow directly into the projects relatively quickly and the expected returns on the investment are lower. EB-5 investors are more concerned with completing the requirements of the program in order to attain green cards for their family, rather than focusing on high rates of returns on the investments. This takes a lot of pressure off developers.
How can developers raise EB-capital? Here are 7 steps to EB-5 financing:
1.Can your project successfully raise EB-5 funds? Does it appeal to EB-5 investors?
EB-5 investors are primarily interested in projects that will fulfill their EB-5 Program requirements. The majority of EB-5 applicants invest in a regional center project. Regional Center projects are usually designated TEAs, meaning that they're located in high unemployment areas, and thus the capital required for a TEA investment is lowered to $500,000.
Regional Centers also have a more flexible job creation requirement. Instead of direct job creation through the regular EB-5 program, the Regional Center Program allows jobs created to be direct, indirect or induced. EB-5 applicants are extremely concerned about requirement to create 10 full-time jobs in the two-year timeline set by USCIS.
2. Is your project through the regular EB-5 program or through the Regional Center Program? Have you considered sponsorship with Regional Centers?
Have you conducted research on all the regional centers in the areas that you're interested in developing a project? Do they have a strong reputation and years of experience? Does the regional center have USCIS designation?
3. Does your regional center provide marketing? Do you have to find a marketer?
Does your regional center have partnerships with EB-5 agents? Or will you have to find your own EB-5 agent to market your project abroad? China accounts for over 80% of EB-5 visas in the last few years. Conduct due diligence when visiting EB-5 agents in China. Read about licensing and Chinese laws. Develop a relationship with an agency who will agree to market your project. If they are serious about your project, they may, on their own expense, fly out and visit to see your project firsthand.
Click here for more information on how to find Chinese EB-5 agencies.
4. Prepare an offering memorandum for potential EB-5 investors.
After speaking to banks, lenders, and immigration attorneys, have offering documents prepared and ready for translation. Banks typically require an exit strategy for EB-5 investors. You'll also need agreements drafted for limited partnerships or limited liabilities.
5. Begin your marketing campaign in the chosen foreign countries.
A regional center marketer or an EB-5 agent will begin marketing your project and finding interested qualified investors. This process may take a few months.
6. Commencing with the EB-5 investment.
Once the investor has begun their EB-5 immigration process and filed the I-526 petition they will place the full investment amount in escrow.
Click here to find about the new and much quicker mechanisms being used to release investor funds.
Once the I-526 petition is approved, EB-5 investors will receive conditional immigrant visa for two years.
7. Provide project completion for EB-5 investors.
In order for the EB-5 investors to attain their goal- lawful permanent residency (green card status), they must provide proof that following their I-526 approval, that the project was completed and that it created 10 full-time jobs for qualified U.S. workers within the 2 years.
If either of these, the completion of the proposed project or the creation of the requisite number of jobs was not completed and on time, the EB-5 investor will lose their conditional immigration visa status.
It is imperative for any regional center or developer to consider their reputation through this process. Acting professionally, instilling trust and confidence in their investors, and meeting deadlines will help developers and project coordinators find more EB-5 investments for future projects through referrals and reputation.