How does an EB-5 capital raise work?

This will work within a regional center setting.

Loans will not work unless the investment is made through a regional center that can structure an equity investment into a new commercial enterprise (NCE) with the NCE loaning capital to the job creating enterprise (JCE). That is indirect job creation. For non-regional center EB-5 investments (called direct EB-5) the jobs must be directly created. Therefore, the investment must be an equity investment directly into the NCE, which is also the JCE (as the NCE wholly owns the JCE). There is no minimum equity amount and the investors can be limited partners or other members with policy formation/advisory role only, no day-to-day management needed. You should consult directly with an experienced EB-5 immigration attorney if you need more detailed information about how this can be structured.

A capital raise can most certainly be based on debt. In fact, I personally think those are better deals for both sides.

EB-5 investments can fund restaurant locations in a Regional Center loan model.

An EB-5 structure can vary depending on your specific needs and wants, but must remain compliant with USCIS rules, regulations, and procedures. You are asking a lot of great questions.

A debt financing arrangement (such as a loan) between the investor and the new commercial enterprise in which the investor is acting solely as a creditor does not constitute contribution of capital under EB-5 Direct Investment regulations. For example, a contribution of capital in exchange for a note, bond, convertible debt, obligation or any similar debt arrangement between the investor and the commercial enterprise is not a qualifying investment. Similarly, plans calling for guaranteed payments from the new commercial enterprise are prohibited under a direct EB-5 investment - especially in the first two to three years (i.e. before the I-829 application). An agreement under which a new commercial enterprise guarantees an annual return on capital, regardless of whether the business is making a profit is, per USCIS, similar to a debt arrangement in which the company promises to pay interest payments on capital loaned to it by the investor. Per USCIS, such arrangements fail to meet the "at risk" element of a Direct EB-5 Investment. On the other hand, it is permissible for an investor to enter into an agreement that grants him the right to sell his interest back to the enterprise so long as such agreement is made “after” the investor has invested the capital and after the investor has become a lawful permanent resident. Additionally, it is permissible for an investor to receive a return on their capital (i.e. a distribution of profits) so long as prior to or during the two-year conditional residency period, and before the requisite jobs have been created, the return is not a portion of the investor''s principal investment and was not guaranteed to the investor. USCIS has stated that an acceptable EB-5 investment may consist of an equity investment in a commercial enterprise that in turn makes a loan with the invested capital to a borrower. In that structure, the commercial enterprise may receive a guarantee from a third party that the borrower would repay the borrowed funds to the commercial enterprise. USCIS rationalized this arrangement by explaining that there is currently nothing in the statute or implementing regulations that precludes a third party guarantee as long as the investor''s capital is still “at risk,” and the arrangement does not constitute a redemption agreement or a guaranteed buy-back arrangement for the investor''s capital in the commercial enterprise. However, each situation is unique and there are many creative ways to structure EB-5 investments to meet the project owner''s needs while still complying with EB-5 regulations.