Written By Attorney Elizabeth Chatham
Does your business need capital but you are struggling to secure conventional financing? Do you know high net worth foreign investors or entrepreneurs who may wish to move to the U.S. permanently? The EB-5 program enables both of these while simultaneously helping our economy get back on track.
What is the EB-5 Immigrant Investor Program?
Congress created the EB-5 program in 1990 to stimulate the U.S. economy through capital investment and job creation. Every year U.S. Citizenship and Immigration Services (“USCIS”) makesapproximately 10,000 green cards (permanent residency) available to foreign citizensand their families who invest $1 million (or in some cases $500,000) in a new commercial enterprise or troubled business and thereby create at least ten news jobs in the U.S.Certain EB-5 visas are also available to investors in Regional Centers, which are designated economic entitiesthat promote regional productivityand growth.
Key Aspects of the EB-5 Program
In addition to proving that the requisite amount has been invested and that it will create at least ten new jobs, there are a few other aspects of the EB-5 program to keep in mind. First, USCIS is strict on requiring investors to clearly document a legal source of their investment. Second, the investment must be “at risk” in order to qualify—there can be no guarantees of a return on the investment. Third, the logistics of transferring a large investment amount to the U.S. is sometimes made more complicated by currency controls. Regardless, with competent legal assistance early on in the process, these issues can all be addressed and resolved.
How DoesEB-5 Financing BenefitDomestic Business?
Since its inception, the EB-5 program has spurred the injection of billions of dollars into the U.S. economy and has helped create tens of thousands of new jobs. Last year alone, American enterprises raised an estimated $1.25 billion in EB-5 foreign investment and thus created or saved more than 55,600 jobs. According to USCIS, interest in the EB-5 program has grown exponentially from both domestic project developers seeking capital and overseas investors.
Besides the fact that business in general is better in a stronger economy, the EB-5 program provides an excellent alternative to traditional corporatefinancing options in today’s credit market. To illustrate by example, a small clean technology company focused on producing natural chemicals from waste biomass recently finalized terms for a $15 million funding agreement through the EB-5 visa program.This financing arrangement is expected to create, directly and indirectly, 413 new jobs in the community while enabling the company to substantially expanditsoperations from processing three tons of biomass per day to 55 tons per day.
Chances of Success and Related Risks
The EB-5 investor faces two primary risks. One of these is the inherent risk of losing money in a failed investment. The other, and related, risk is that USCIS ultimately denies their permanent residency application. The first two years of the foreign investor’s green card are conditional oninvesting the entire requisite amount and creating at least ten new jobs. If this cannot be shown, the investor will lose their immigration status.
Despite these risks, USCIS has approved a very high percentage of both initial petitions and subsequent petitions to remove conditions. Below is a table summarizing EB-5 adjudications:
Number of EB-5 Petitions, Approvals, and Denials
Initial EB-5 Petitions
Fiscal Year
Petitions Received
Approvals
Denials
Approval Percentage
2009
1,028
1,262
207
86%
2010
1,955
1,369
165
89%
2011
3,805
1,563
371
81%
TOTAL
6,788
4,194
743
85%
EB-5 Petitions to Remove Conditions
Fiscal Year
Petitions Received
Approvals
Denials
Approval Percentage
2009
437
347
56
86%
2010
768
274
56
83%
2011
2,345
1,067
46
96%
TOTAL
3,550
1,688
158
88%
The top five countries from which EB-5 investors have come from in the past six years include: China, South Korea, Great Britain, Taiwan, and Iran, with the first-mentioned accounting for about 50% of all EB-5 investors in that time period. In short, the EB-5 program has developed into a phenomenal opportunity for U.S. businesses to raise capital, for overseas investors to move to the U.S., and for the U.S. economy to regain strength.
* For questions about the EB-5 program and other immigration-related investment opportunities, please contact Davismiles.com. or call 1-800-435-5081.