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What Is EB-5 Financing?

The EB-5 program was established in 1990 by the US government as a unique alternative to traditional sources of funds.  The EB-5 Visa program was designed to encourage foreigners to invest in the United States and create American jobs in exchange for a U.S. green card. Known as an EB-5 visa, the program has boomed over the past several years, as traditional forms of financing dried up for projects ranging from hotels and casinos to wind farms and frozen-yogurt franchises.As credit markets have tightened in the wake of the financial crisis, more and more American businesses and developers have turned toward EB-5 funds to raise the required capital for their projects.

And the program is popular…. Last year, 6,434 foreign investors applied for visas under the program, up from 6,040 in 2012, according to data from U.S. Citizenship and Immigration Services.

But how can the EB-5 program benefit you as a developer?

How the EB-5 Program Works

The U.S. Congress established the Immigrant Investor Program, or EB-5 program, in 1990 in order to stimulate the U.S. economy and encourage foreign development. Under this program, the foreign national must invest either $500,000 or $1 million, depending on where the project is located, in a new commercial enterprise in the United States. Their investment must create at least 10 U.S. jobs.

In 1992 Congress expanded the program by creating the Immigrant Investor Pilot Program, which established EB-5 Regional Centers. Regional centers allow investment funds to be pooled together in USCIS-designated enterprises, and allow for investments in different and larger projects that require a larger inflow of capital. Investing through a regional center also holds a benefit for the investor, as he or she is allowed to count indirect and induced jobs toward the job creation requirement.

Because regional centers and investors do not have to worry about creating 10 direct jobs per investor, multiple EB-5 investors can invest in the same project and they can all meet the job creation requirements to obtain an EB-5 visa and green card.  For example, consider an $80 million hotel/resort project that is expected to create 85 direct jobs, and 320 indirect jobs. This project could accept eight EB-5 investors (at either the $500,000 or $1 million investment level) if only direct jobs were counted, as is required in the case of a direct investment.

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This would raise a total of $4-8 million of immigrant investor funds for the project. Through a regional center, however, the project could count the additional 320 indirect and induced jobs, bringing the total job count up to 405, and the maximum number of EB-5 investors up to 40—allowing the project to raise $20-40 million in EB-5 investor capital, or 50% of the total needed. We would finance the balance of the project at 100% LTV/LTC.

Raising Capital

Although the regional center program is often seen as a win-win, it does require knowledge, expertise and patience, and is not without difficulties. It is important to consider all the requirements and costs of the EB-5 process and all the available options. We can evaluate all these variables, and help determine if this is a valid solution for you.

Regional Center Designations

One way of raising EB-5 capital is for the developer to seek regional center designation from USCIS. This process requires you to submit an I-924 application for regional center designation and supplemental information that outlines the geographic and industrial scope of the regional center, as well as the economic impact and job creation prospects of the regional center’s projects. The approval process is lengthy and may require you to respond to multiple requests for evidence (RFE) from USCIS, sometimes turning the approval into a long process.

Affiliating with an existing regional center

If you are a developer that is looking to raise funds in the immediate future, it may be a better choice to work with an existing USCIS-designated regional center. Many existent regional centers will accept the projects of outside developers, and we can assist you with this process.

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Direct Investment

If you are considering the direct investment route, you would receive an investment directly from an individual investor (or investors) and would not associate with a regional center. The benefit of this option is that you would not have to file an I-924 application with USCIS as a developer, but you must take into account the stricter job requirements.

Summary

Overall, the EB-5 Immigrant Investor Program is a popular and viable option for developers in a wide array of industries. By the end of 2013 the number of individual immigrant investor petitions (I-526) had reached an all-time high, and the numbers in 2014 are expected to be even higher. If managed properly by an individual developer, and used for the right projects, the EB-5 visa program is a legitimate and unique option for financing commercial enterprises in the United States.

Let our professionals help you with the EB-5 process, provide funding for a worthwhile project, create jobs, and allow you to obtain an EB-5 visa here in the U.S.

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