Questions and Answers > EB-5 Investments

Which EB-5 regional center payment option is more advisable?

An EB-5 regional center is offering us two choices: preferred equity with higher returns or debt money (a loan to the regional center) at a very low interest rate. It says that a loan is paid back before preferred stock. My understating is that debt money has a very low interest rate but a higher chance of getting the principal back. Is there any other difference that I should pay attention to? Which option would you recommend and why?

Answers

• Lynne Feldman

  Immigration Attorney

  Answered on March 20, 2023

  We cannot give investment advice. You may want to retain someone separately to advise on that.

• Belma Demirovic Chinchoy

  Immigration Attorney

  Answered on March 16, 2023

  Your goal should be to 1) get permanent residence; 2) get your principal back within a reasonable amount of time; and 3) receive some ROI to cover a part of your costs associated with EB-5. You need to read the contracts closely and make sure you understand the implications of both options before deciding.

• Bernard P Wolfsdorf

  Immigration Attorney

  Answered on March 15, 2023

  You need to have an expert investment advisor and look at each project carefully. There is no one formula that works as there are so many factors to evaluate. Generally, the better projects do not offer good returns but look at the specific project and evaluate viability using commonly accepted investment analysis criteria. Do due diligence and then do due diligence on your due diligence advisor.

• Phuong Le

  Immigration Attorney

  Answered on March 15, 2023

  Completely depends on your investment risk and a few other factors that you may want to consider below. In every business, debt is going to be paid before equity. In EB-5, what we normally say is debt should be as low risk as bonds but the trade off is obviously very low return. The goal there is simply preservation of capital. For preferred equity, yes the returns are higher but an analysis of where EB-5 preferred equity actually sits in the capital structure (and associated waterfalls) are important. You can go back and forth about this but one simple thing to consider is how far along is the project. The funny thing about EB-5 investments is your buy price is generally the same regardless of whether you invest before the project breaks ground or if it is almost done. Preferred equity may be riskier in the beginning but if near the end, then that risk should be substantially less. Something to consider.

• Dennis Tristani

  Immigration Attorney

  Answered on March 15, 2023

  The timing of repayment, interest rate, and financial risk are all issues to consider when considering a specific EB-5 project. This is a question you should discuss with your financial and/or legal advisors.