If I buy a company for $1 million by paying $250,000 cash to the owner and receiving $750,000 as seller’s financing to be repaid over some years, does this comply with EB-5 requirements as a $1 million investment? And (in case it is not a distressed company but a somehow “regular” business) do I have to increase employee count by +10, regardless previous number of employees?
If you are investing in a troubled business, your investment must increase the business or workforce by a minimum of 40 percent. If the investment is financed, the loan must be secured by the investor''s personal assets. Please note that the debt may not be secured by the new commercial enterprise.
It depends on how you finance the purchase. If you use the asset of the company for finance, then no. Also, you need to create more jobs.
The best solution is to create a new company to do the acquisition and that way you create the jobs. In terms of seller financing, the issue is based upon how you guarantee the the debt and your other assets.
If the debt is secured by assets of the new commercial enterprise, then no; it does not count as qualifying investment capital. If you, the investor, are personally and primarily liable for the debt (i.e., it is unsecured or secured by your own personal assets), then it may count as qualifying capital. If it is not a "troubled business," then you need to add at least 10 new full time jobs.
An existing business must increase its net worth or number of jobs by 40 percent.
You will definitely need to be guided by an experienced EB-5 attorney. Whether the investment requirement is $1million or $500,000.00, you can not invest less than the required amount and then have the balance financed by the seller. That is the entire investment amount has to be invested otherwise the investment regulations have not been met. Also, investing in a regular business you will have to show more jobs are created than the existing ones.
The investment funds must be the investors personal funds. If the loan is an actual loan and not a gift disguised as a loan, you may be OK. You may also need to show you are an "accredited investor" that complies with SEC regulations. Employee counts for existing business will need to increase by more than 10, depending on the current business. Issues like these are why we recommend retaining qualified EB-5 counsel, like the attorneys at our law firm, to assist and represent you.
