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What guarantees can EB-5 project developers offer investors?

I am an EB-5 investor looking for repayment of my investment and interest after the project complete. However, I also don''t want the project I invest in to be in violation of USCIS rules. What kind of guarantees are EB-5 project developers allowed to offer to investors? Am I allowed to receive a return on my investment?

Answers

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    Salvatore Picataggio

    Immigration Attorney
    Answered on

    No guarantees should be made to the EB-5 investors. Investments must be 100% AT-RISK!

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    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    No guaranteed repayment or redemption at a specific date for a specific amount. There can be no redemption before the condition is removed. It is just the same as if you invested in the stock market or started your own small business. Since a loan does not qualify for EB-5, the investment must be at risk and fully committed to the new commercial enterprise. This means that at all times during the conditional period, your investment must be subject to potential gain or loss.

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    Charles Foster

    Immigration Attorney
    Answered on

    Yes, you are entitled to a return on your investment and to recoup your investment all according to the terms of the EB-5 project. All projects must be at risk, meaning that you can make money or lose money depending upon the soundness of the investment; however, your investment must be at risk up until the time you qualify not only for conditional permanent residency, but until your conditions are removed. So, it is not possible for your investment to be returned until you have filed your I-829 petition to remove conditions; however, the investor cannot be guaranteed the investment funds even after the I-829 petition is approved.

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    Jinhee Wilde

    Immigration Attorney
    Answered on

    One of the requirements for the EB-5 visa category is that the investment be "at risk." Thus, if any project provides any guarantee on return of investment or return on investment, USCIS will deny your case. Having said that, there are several regional centers that have done multiple EB-5 projects where they provided their investors with nominal return on investment annually while getting the approvals and then finally returned the investment principals after the maturity dates. While the past performance does not guarantee success of future performance, that is the best marker for any assurances without actually providing a guarantee, which is not allowed under the law.

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    BoBi Ahn

    Immigration Attorney
    Answered on

    One of the requirements of EB-5 processing is that the investment be "at risk" in a real world investment sense, and that there are no "guarantees" of the capital being returned to the investor as a mere vehicle for getting the permanent residence. Therefore a "loan" to the project is not acceptable, and guaranteed refund of the initial investment is not acceptable; however, the investor may definitely receive return on investment (i.e., profits, dividends, etc), and may also have an exit strategy in place for the investment made. Another protection for the investor which USCIS allows is that the EB-5 investor's money can be held in escrow by the project, until the EB-5 petition is approved, and if not, the money would have to be returned to the investor. This is authorized and does not negate the at risk provision.

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    Lynne Feldman

    Immigration Attorney
    Answered on

    You are allowed to receive a return on your investment, but your money must be at risk during the process. Look at it like any other investment in terms of the return. As far as the USCIS rules, you should make sure the project is likely to be built and 10 jobs created within about three years of your investment.

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    Phuong Le

    Immigration Attorney
    Answered on

    It is possible to have certain guarantees to help minimize the risk in a project. The key is who is the guarantee made to and for what purpose? It is possible, for example, to have a third party guarantee made to the NCE/lender if there is an EB-5 loan made to a borrower. In that situation, it would be analogous to a co-signor on a traditional loan. What cannot happen, however, is any guarantee that flows directly to the individual investor. That is a clear violation. It is generally ok to receive a ROI so long as it is clearly not a return or payment of principal.

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    Bernard P Wolfsdorf

    Immigration Attorney
    Answered on

    You can absolutely receive a return on your investment; however, the investment must be "at risk" so guarantees are problematic and will ordinarily result in denial. It is therefore critical to ensure that the investment capital stack is structured to befit the investor, and that there is adequate collateral in the event the business fails.

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    Vaughan de Kirby

    Immigration Attorney
    Answered on

    All of these are excellent questions that you should discuss with your broker dealer. There can be no "guarantees" as your funds must be at risk. You can obtain a return, but generally it is going to be minimal - perhaps 0.25 percent. If you are offered a substantial return, you may be looking at corresponding risk. If you work with a broker dealer, he or she will help you find a regional center and developer that you can trust. There are key due diligence steps you will want to work with your broker dealer on.

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