The EB-5 Process: A Brief Overview

By Anish Parikh
The EB-5 Visa was created by the 1990 Immigration Act. It provides a process for foreign investors to become permanent lawful residents by allowing them to finance a business in the United States that will employ at least 10 American workers. The EB-5 process may result in legal permanent residency (a “green card”) for you, your spouse, and your unmarried children under the age of 21. It requires a minimum investment of $500,000 to $1 million U.S. dollars, and the total process usually takes around 22 to 26 months. Other visa programs may take up to several years, and the EB-5 visa has become an attractive option for foreign nationals with large sums of money to invest and seeking permanent residency here in the U.S.
Simply put, if a foreign national invests $500,000 to $1 million U.S. dollars and creates 10 full-time jobs for American workers, they are eligible for an EB-5 visa and legal permanent residency for themselves and their family. An EB-5 investment is often made as a low-interest loan (often around 5 percent) in a new for-profit business opportunity. The new business opportunity must succeed for two years and create ten full-time jobs for American workers. A new business opportunity is a business opportunity created on or before November 29, 1990. Older businesses qualify if they have been financially restructured in such a way that a new enterprise results, or if the investment contributes at least a 40 percent increase in either net worth or number of employees hired. EB-5 investments may be used for any for-profit business, including a joint venture, partnership, or holding company, but they are often used in commercial real estate development, especially the construction of condominiums and hotels. EB-5 investors do not have to live in the same state as their investment; you can invest in California and live in Chicago.
To invest as part of the EB-5 process, you must not only prove that you are the legal owner of the capital, but you must show where the capital came from and that it was obtained legally. Although you may invest $1 million anywhere in the United States to qualify, underserved or areas of high unemployment require an investment of only $500,000. Most projects offered to EB-5 investors incorporate areas of high unemployment so that investors only have to invest $500,000. The formula through which many real estate developers draw lines to include areas of high unemployment has been widely criticized by some federal lawmakers, and may not be present when the EB-5 program comes up for reauthorization later in 2018.
There are two types of qualifying investment: direct investment and investment through a regional center. Each has its benefits and drawbacks. You may decide to invest directly in a business opportunity, but direct investors must have a management role. In addition, direct investors must show they created ten direct jobs, meaning the business opportunity must employ at least ten new people as a result of the investment. Direct investments often have a higher rate of return than regional center investments. Regional centers, on the other hand, match investors with business opportunities seeking investment. They make finding a business opportunity much easier, but the regional center takes a commission for their services, increasing the total cost. The United States government recognizes some regional centers, and over 1,300 regional centers have been recognized in all fifty U.S. states, Washington, D.C., and territories such as Guam and Puerto Rico. Most investments made through regional centers have very low rates of return, but regional centers screen potential business opportunities, and so the rate of business success is very high. Regional centers also do not require that the investor take a management role in the business, and allow EB-5 investors to credit both direct jobs directly and jobs indirectly created as a result of the general improvement of the area towards their requirement of ten jobs created. Be sure to weigh the benefits and drawbacks of each kind of investment. If you’re more interested in a green card, investing through a regional center is likely to be a better option for you. If you’re looking for a higher rate of return and are willing to accept greater risk, researching and choosing your investment independently may be the best choice.
The United States government does not wait for two years to grant permanent residency; it grants conditional permanent residency for two years upon completion of the investment. To remove the conditions on your permanent residency, you must prove that the business opportunity in which you invested succeeded, and that your investment created at least ten jobs for U.S. workers. If you forget to update the U.S. government about the success of the business, your permanent residency expires, and you no longer have legal status in the U.S.
The U.S. Securities and Exchange Commission considers EB-5 investments to be securities regulated under U.S. law, which means that anyone seeking to raise money through EB-5 investments must offer certain disclosures about how the money will be used and the risks involved with investing in that specific business opportunity. EB-5 investments are usually “junior” in bankruptcy, which means that if the business opportunity fails, you probably will not get your full investment back, if you get any money back at all. EB-5 scams do exist—be wary of business opportunities that guarantee a green card or U.S. citizenship.
(If you’re thinking of pursuing an EB-5 investment and legal permanent residency, our firm is here to help you. We have handled several EB-5 visa applications and have brought together investors with business opportunities. Please call Parikh Law Group for an in-depth analysis of your EB-5 matter at (312) 725-3476.)

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