When is an EB-5 project better suited as a direct investment or a regional center?

Two factors may be helpful in deciding between the two alternatives. One is whether the direct EB-5 investment will directly create 10 full-time jobs for your enterprise. If a direct investment will create 10 full-time jobs in your enterprise within two years, then a direct investment may work. If it is unlikely that 10 new full-time jobs will be directly created or needed for your start-up/enterprise, then consider joining a regional center, which permits both direct and indirect job creation. The second consideration is the level of involvement you want the investor to have in your enterprise. Direct EB-5 investors are required to show evidence of directly engaging in the business either on a day-to-day basis, or through policy/management. Regional center investors have the flexibility of investing in a center that disburses funding without requiring the investor to actively participate or manage the funded enterprise.

If you want to be involved and have control of your investment then I recommend the direct route.

You need to contact regional centers. Regional centers have their own criteria and differ from each other. The problem with direct investment is recruiting foreign investors. If you have connections, then you can go either way.

It is almost always cheaper and easier to do an EB-5 project as a direct investment. The key is this: Will the project be hiring enough employees to meet the requirement of 10 new employees per investor family? If not, then the advantage of a regional center is that they can count “indirect jobs” to satisfy the employee hiring requirement.

You would have to speak directly to the regional center as to what size investment they would wish to handle. Some only want large projects, while others may be willing to deal with a smaller investment. The regional center program was instituted to allow for the project to count indirect jobs as well as direct jobs. You would have an economic analysis done regarding your project. The analysis might show 10 direct jobs and perhaps another 50 indirect jobs. The more jobs, the more investors you could seek, e.g. 10 jobs per investor.

In general terms, if the project will generate enough full-time jobs directly to accommodate all EB-5 investors, then there is no need to rely on the indirect job creation and therefore no need for a regional center. For most larger projects, however, the number of investors and amount of investment capital being sought requires indirect job creation as well as direct job creation in order to ensure that there will be at least 10 full-time jobs per EB-5 investor. As for small projects, a regional center that does not have a project, or is just starting out, may be more willing to accept a smaller project than a more established regional center. You just have to find the right regional center. As for knowing if your project is better suited for regional center EB-5 or direct EB-5, here are a couple of examples: If your project is seeking $2.5 million and will create at least 50 full-time jobs, then it is perfect for a direct EB-5 investment because the five investors (putting in at least $500K each) will have at least 10 jobs per investor. On the other hand, if your project is seeking $10 million in EB-5 capital, but it will not create the 200 full-time direct jobs that are needed for 20 EB-5 investors, then you will need a regional center and an economic methodology that allow the indirect job creation to make up the difference.

Some regional centers focus on larger projects looking for $20 million EB-5 raises or more. However, other regional centers will take smaller projects. If you want to take advantage of indirect employment, associating with a regional center is the way to go. If you do go that route, having qualified EB-5 counsel review your project for potential compliance and marketability is important.