July 25, 2022

Investing in EB-5 as Equity, Debt, Fund or Mutual Fund – Which is the Best Option?

By Prashant Ajmera EB-5 US Investor Visa, Investor Visa, Regional Centers, Residency & Citizenship by Investment, Second Passport, US Immigration attorney, US Immigration Lawyer, US start up visa program

Understanding Investing in EB-5 and different financial structures?

The pathway to USA Green Card by investment, also popularly known as the EB-5 investment visa program, is considered the easiest and safest way to obtain a Green Card. The law behind the EB-5 investor program is very simple but the creative financial structures set up by investors and related professionals make investing in EB-5 look like a very complex process.

The simple EB-5 law

An EB-5 investor may make an investment of US$ 800,000 in a new commercial enterprise / new business which will create 10 new jobs provided the business is located in a rural area or high unemployment area or the project is an infrastructure project. In all other cases, the investment amount shall be US$ 1,050,000.
The investment should be a business risk.
The investment amount should come from a legitimate source, including earned money or a loan, or a gift.

This simple EB-5 regulation has been converted into complex financial structures, making the investment process seem very complicated for investors.

Here are the direct and indirect EB-5 investment scenarios:

Direct Investment

An investor can start on his own or partner with someone in the USA for a new business located anywhere in the USA, make an investment of US$ 1,050,000 and create 10 jobs. The investor will then qualify for a visa under the EB5 program. If this business is located in a rural area or high unemployment area, the investment amount will be US$ 800,000.

Investors who are capable of operating and managing a business may opt for this type of direct investment.

Indirect investment

In this case, several geographical areas in the USA may be combined and approval from USCIS is obtained to declare the area as a Regional Centre.

It is under this type of indirect investment, various financial structures are offered to investors for making an investment.

Here are some simple examples:

EB-5 Equity investments

A developer in the USA approaches USCIS to receive permission to declare a certain geographical area of the USA as a regional center. The developer then starts his project in this area and uses the EB-5 program to raise funds. The project will also be financed by a bank loan and the developer’s equity in the regional center as well.

In this type of project, the developer invites investors to make an investment as equity or as preferred equity partners.

Very few developers in the USA use this model. In such cases, there is one project and one developer.

EB-5 Debt model

A company raising funds for a business or project in the USA may approach USCIS to receive permission to declare a certain geographical area of the USA as a regional center.

Once the area is declared a regional center, the company may approach developers or businesses to set up a project there.

Rather than making a direct investment in the project company, in this case, a second company is created in which EB-5 investors make an investment as equity partners. This company then gives a loan to the project company to carry forward the project. Hence this is known as the Debt model.

This is the most popular model for EB-5 investment.

It is interesting to note that US companies assisting to raise funds for US developers or businesses also undertake marketing for EB-5 projects outside of the USA to attract EB-5 investors.

In this case, too there is one project and one developer but there is also an intermediary company, such as a fundraising company and/or EB-5 marketing company.

EB-5 Fund / Mutual Fund model

A company raising funds for a business or project in the USA may approach USCIS to receive permission to declare a certain geographical area of the USA as a regional center or the company may rent a regional center from another company who has already received approval from USCIS for a regional center.

Once the area is declared a regional center, the company may approach several developers or businesses to set up a project there.

The EB-5 fund may be created for just one project or business or several projects or businesses in a regional center.

Using EB-5 funds for several projects reduces the risk by diversifying the portfolio as in the case of regular mutual funds in financial markets.

This model is used by very few companies in the USA.

To protect EB-5 investors, the US government has introduced the new EB-5 Reform and Integrity Act. Thanks to this new regulation, we may see a major shift in the EB-5 marketplace. Many companies marketing EB-5 projects or raising funds or renting regional centers may face financial viability issues due to a long list of compliance requirements.

Depending on your personal aptitude, investors may decide to invest in EB-5 to receive a USA green card.

Legal disclaimer:

This blog is written in a very simplified manner for the purpose of making investors understand the various models related to EB-5 investment. Investors are advised to consult a qualified US immigration lawyer before making any decision regarding an EB-5 investment.

For Indian investors – Investing in an EB-5 visa from India is a legal matter and as per Indian law, only Indian lawyers having expertise in the EB-5 program must be consulted.

February 10, 2019

What Question investor should asked for EB-5 investment?

By Ajmera Law Group EB-5 US Investor Visa, Green Card, Investor Visa, Regional Centers, Residency & Citizenship by Investment, USA

How to select your EB-5 project and make a safe investment in the EB-5 project?

Regional Centers, Broker dealer, Agent, and mortgage broker who is showing you EB-5 project, you should ask the following questions.

What year was the Regional Center first approved by USCIS?
How many EB5 projects have the Regional Center completed?
How many I-526 and I-829 approvals obtained by the investors in the Regional Center.
May I have a copy of the PPM _ Private Placement Memorandum) so I can review the credit agreements for the senior bank loan and the other loans?
Is it true that the EB-5 loan is the last loan to be repaid because the Senior Bank Loan will be paid first?
Does the EB-5 loan have a security interest in real estate or in the assets of the developer or Regional Center?
May I have a copy of the EB-5 insurance policy? Does the policy cover the 3 primary reasons for application denial: fraudulent statements, criminal background and source of funds issues?
If the project doesn’t sell as quickly as expected, could the EB-5 loan be extended beyond 5 years?
If the project sells for 15% less than expected, could I lose all or a portion of my investment?
Where is the money coming from to pay the interest on the bank loan?
Does the Fund provide the letter from the senior bank loan and the private loan as well as the Targeted Economic Area?

Find out these answers and consult our law firm to compare answers with Regional centers we work with and answer provided by them to these questions.

Email: prashant@ajmeralaw.com

July 28, 2018

Simplifying the EB-5 Program – Investing in EB-5 business as a debt, equity partner or in the fund?

By Ajmera Law Group Citizenship, EB-5 US Investor Visa, Green Card, Regional Centers, Residency & Citizenship by Investment

Of late a large number of regional centers have entered into the EB-5 market, offering a variety of investment choices to investors. This has resulted in investors becoming more and more confused regarding the most appropriate investment option most suitable to their needs and long term goals.

I regularly meet clients who have a very sound financial background, yet are completely lost when choosing the right EB-5 investment.

Here are the three most common offerings in the EB-5 market at present:

DEBT Model:

98% of the offering in the EB-5 market is using this model. This model involves three entities:

(i) The company who has been granted the ‘Regional Center(RC)’ approval

(ii) The developers who have incorporated a company or LLP -1 for the project, and

(iii) Another LLP-2 which is used as an investment vehicle for EB-5 purposes.

As an investor, you will be making investment in LLP-2 which will loan fund to LLP-1. In return, LLP-1 will give credit for all jobs created in the project to LLP-2so as to meet the mandatory ‘Creation of 10 jobs’ requirement of the EB-5 program.

Investment is generally made for a period of 5 years and at the end of 5 years, the capital is returned to the investor by taking a second mortgage.

LLP-1 also offers interest to EB-5 investors which can be in the range of 1%-4% per annum. Ideally, if all these three entities are managed by one single developer company, then this particular EB-5 project can be considered a good selection.

However, in reality, we see that RC approval is obtained by one entity, which then seeks out a developer to develop the project and an entirely different third company is involved in marketing the project. If you do adequate research you will find that there are very few developers who are directly involved in the marketing of their project.

In these type of projects, the local banks havethe first claim, promoters have second claim and EB-5 investors have the last claim to receive any money in the event of project failure.

EQUITY Model:

Very few companies are currently offering the equity option for EB-5 investment. In this model, only one company or LLP is created by developers of the project and EB-5 investors are required to make an investment in this particular LLP only. EB-5 investors give the managing rights to the developers. In this model, the investors are not given any fixed returns but are offered a percentage of the profits as and when the project becomes profitable, while the developers take only a small portion of the profit.

In this model, the risks are higher but returns can be as high as 10%-12% per annum. Some of the hotel projects for which our law firm has raised EB-5 investment capital were based on this model and have consistently given good returns.

In many EB-5 projects, there are no loans from local banks or lenders except bridge loans. Because of this, the properties are mortgage-free right from day one and chances of failureare very low,while those of good returnsare very high.

In case the project fails, the capital can be distributed amongst all the EB-5 investors as compensation since there is only one class of investors.

FUND Model:

Quite a few RCs are offering this model now. In first two options, there is one project and one company or LLP. In the Fund model, a fund of a certain predetermined amount is created to loan money to several projects and hence the risk is distributed equally among several projects. An annual fixed return is given to investors which can be in the range of 1%-3%.

Simply put, the first model can be compared to a debenture, the second one to a share investment and the third one to a mutual fund investment. Each model has its own pros and cons. However,the bottom line is that a viable EB-5 project must have good developers who have a successful track record in non-EBB and EB-5 project development.

This article outlines very general information regarding EB-5 investment options for the sole purpose of easy understanding for investors at large. Each investor must seek appropriate legal advice and consult their financial advisers before making any kind of the investment.

July 10, 2018

Doing business or Investing in USA – EB-5 – L1 – EB-1 (c) or E2 visa

By Ajmera Law Group EB-5 US Investor Visa, Green Card, Investor Visa, Regional Centers, Residency & Citizenship by Investment

Doing business or Investing in USA: Nine different options for Indian businessman

This is a very simple way to explain, how one can make an investment in the USA or do business in and with the USA.

Simple export of goods and services to USA consumer or business.
Making an investment into an existing business, land building, or farming land and become partner/investment. You do not any visa of the USA and you don’t get any visa by just making a simple investment.
Purchase of Real estate in the USA – any type of visa not possible but can take benefit of rental income and capital gain.
Register a company in the USA, open an office in the USA, a bank account in the USA in person, hire local people to run the business. No Person is transferred from India to the USA.
Register a new company in the USA, open a subsidiary office in the USA, a bank account in the USA, hire local people to run the business with a definite business plan and KEY PERSON(S) IS TRANSFERRED from India to the USA. This is an L1 visa. A person is a senior executive and Technical Person to be transferred from the USA. The American company will be a subsidiary of the Indian company.
Indian company taking over 51% of the USA company and by join venture, Indian CEO or Key technical person transferred to the USA under EB-1-C Visa class.
Starting a NEW business in the USA, hire 10 people and make an investment of 1 million US$ and investor, his spouse and children under 21 can get a green card of USA. – This is an EB-5 direct investment.
Starting a NEW business in the USA, hire 10 people and make an investment of 1/2 million US$ and investor, his spouse and children under 21 can get a green card of USA. This business must be in an area where there is high unemployment or a population is less than 20,000. This is EB-5 under the Regional center class.
You make an investment in Real Estate and become a citizen of another country like Grenada, Turkey, Canada and then apply for an E2 business visa of the USA to do business in the USA.

December 5, 2017

EB-5 USA Green card – Investment as Debt or Equity or Fund?

By Ajmera Law Group EB-5 US Investor Visa, Green Card, Investor Visa, Regional Centers, Residency & Citizenship by Investment

USA green card by investment – EB-5 Visa:

Investment can be made as Debt or Equity or Fund

The EB-5 Visa provides the most flexible path to a Green card and is based on investment in the US. The EB-5 Visa does not require the applicant to manage the day-to-day affairs of a business. One may invest in an existing business or a new business. More than one person may invest in the same business. The EB-5 investor may be a minority owner of the business.

One may qualify for an EB-5 Visa by:

Investing One million dollars and hiring ten employees anywhere in the USA.
Investing $500,000 US and hiring ten employees in an area where the unemployment rate exceeds the national average unemployment rate by 150%.
Investing in a regional center.

The INS has designated specific areas, called Regional Centres, as eligible to receive immigrant investor capital. The INS has approved over 520 Regional Centres. Regional Centre investors may rely on indirect job creation rather than directly hiring ten employees. A competent professional, such as an economist, must quantify the indirect employment. If the regional center is in a high unemployment area, the required capital is reduced to $500,000 US. Presently there are projects underway in many regional centers whereby making an investment of $500,000 in a limited partnership can qualify an individual for applying for a green card through the USA EB-5 investor program.

Out of the 10,000 Investor visas (EB-5 Visas) available annually, 5,000 have been set aside for those who apply under a pilot program involving an INS-designated “Regional Centre” To date, this quota has not been exceeded.

EB-5 investors include people from all walks of life – professionals, business people, persons wanting to facilitate a child’s education, and retirees. Because the EB-5 Visa permits employment in the US, many EB-5 investors become involved in charity or part-time work. Simply put, the EB-5 visa gives you the flexibility to do what you want in the USA.

Our firm has identified several regional centers that offer investment as Debt which is a loan to a business, Equity in which investor is a partner in the business, or Fund investment in which fund is created to loan several businesses and risk is minimized.

Make an investment in the EB-5 project with confidence.

Do not do an analysis of the EB-5 project but find the right immigration lawyer in India and the USA who can assist you to navigate the whole process of EB-5.

Prashant Ajmera & Associates

Category Archives: Regional Centers