How to do due diligence on an EB5 investment?

To do immigration due diligence, hire an EB-5 immigration law specialist, and to do financial due diligence, hire a registered financial advisor.

Due diligence of projects is critical when pursuing legal permanent resident status through the EB-5 program. A review of the project, its principals, as well as the regional center itself should be conducted before the investment is made. Having an experienced EB-5 immigration attorney explain the process and the options will provide you with some fundamental information as a first step. In terms of the different between the amount of the investment, the requirements for both investment levels are the same. The only difference is that to qualify for the lower $500,000 investment the job creating entity where your money is invested must be located in a Targeted Employment Area.

If your question is in regard to a direct investment, then the only difference between investing in a TEA or elsewhere is the required capital investment. Investments in a TEA reduce the standard threshold from $1,000,000.00 to $500.000.00. If you are investing in a regional center project that is located in a TEA then you would benefit from a reduced investment as well as being able to count both direct and indirect jobs for your job creation requirements.

You would conduct due diligence in the same manner as you would for any business. However, some key components to review in EB RC programs are:

1. Is it an equity investment vs. debt financing?
2. How far along is the project?
3. How many investors are needed?
4. How many have been recruited?
5. How strong is the economic report and business plan?
6. How many i-526?s have been approved?
7. How many i-829?s have been approved? These are just some of the basic steps, you may want to consider hiring a firm and/or attorney to analyze the prospective project for you.

You should engage in due diligence efforts in order to choose a viable EB-5 investment. If you are interested in a reduced investment of $500,000, the best option would be to conduct due diligence of USCIS-approved Regional Centers. USCIS maintains a list of approved Regional Centers on its official website. Often times, immigration attorneys will be able to guide you to what type of Regional Centers historically have strong statistics in approvals of I-526 petitions and most importantly I-829 petitions (when restriction on a 2-year conditional green card is removed and an EB-5 investor receives a permanent green card in the US). Many Regional Centers allow you to review their offerings upon signing a Confidentiality Agreement. You are strongly encouraged to have an attorney review the documents and advise you about specifics of a particular project or projects, investment requirements, and exit strategy. You are also strongly encouraged to hire a qualified investment broker/financial adviser to review at least several Regional Centers and projects before making an investment in a particular Regional Center/project. Under EB-5 regulations, investment must be at risk to qualify you for this type of visa. Attorneys do not provide investment advice. However, an EB-5 immigration attorney and an investment broker/financial adviser help you mitigate the risk by avoiding investing into a Regional Center which does not have established statistics. Please do not hesitate to contact our office should you have further questions and we will be happy to discuss the details with you.

The main difference is the amount of money involved. Normally, if one can find a suitable $500,000 project, he/she should not invest in a $1,000,000 project.

They have the same requirements other than the investment amounts. However, it is not always easy to find TEA.

Due diligence includes considering your return on investment, track record in obtaining I-526 and I-829 approvals, and having a viable exit strategy. In addition, in any investment you should also consider: Who are the managers? What is the project? What is their business plan? What is their track record for following through on projects? Is the land secured if needed and permits in order? How realistic is the business plan? Will the requisite number of jobs be created, etc.

The EB-5 requirement calls for $1,000,000 investment unless the business enterprise/project is located in TEA (targeted employment area) for higher than national average unemployment verified by a governmental agency. Because there are over 250 Regional Centers approved by USCIS to pool EB-5 investors and investments and help EB-5 investors to file for immigration benefits, it is very important to do your due diligence. While as an immigration lawyer I do not endorse or recommend any particular regional center, I would suggest that you ask every regional center at least these following questions:

1. How many EB-5 cases did you successfully do?

2. How many I-526 and I-829 approvals have you received?

3. What is the exit strategy for getting your investment return after receiving I-829 approval?

4. Do you have any record of returning the investment amount after I-829 approval?

5. What happens or how do you get your money back if your I-526 is denied?

Due diligence is very important in choosing which EB-5 project you will invest in, or if you will use EB-5 at all. There are numerous professionals, immigration attorneys, business specialists, listed on the EB Investors.com website to assist you in this process. The TEA issue is only one issue of many that should be reviewed in any project.

First, I suggest that you work with an attorney familiar with the EB5 programs, they are involved in the processes. Due diligence is about carefully looking into each piece of the project and process. Due diligence in an investment sense would involve an assessment as to return on your investment. In an EB5 sense, due diligence additionally includes assessing the likelihood of the investment satisfying the 10 full jobs requirement at the end of two years and the difference between $1,000,000 and $500,000 EB5 investments. The standard rule is that the EB5 investor puts $1,000,000 at risk in a business he or she will personally run in the United States. Where the business is located in regions designated by the state as having high unemployment, the initial investment is reduced to $500,000. In both situations, the business plan must show that the business will create 10 full time jobs within a reasonable time. If a person chooses to invest as a limited partner while the general partner manages the investment, a $500,000 investment may be made in a USCIS approved Regional Center. I tried to simplify the key issues and steps below.

Step 1: Do you want to invest in, and run, your own business? Or do you want to invest but do not want to run your own business?

Step 2: From this step onward, each step depends upon the answer to step 1. These steps include developing a business plan or choosing an EB5 project.

Step 3: If choosing an EB5 Regional Center project, be reasonably assured that the project will attract enough investors to be completed and establish 10 full time jobs for each $500,000 invested within a reasonable time, 2 years. How may investors have already committed to the Regional project? How many are needed before the project can begin? How good is the economic analysis of the jobs being created directly and indirectly by the project? Does the Regional Center have equity itself invested in the project so that jobs created by that equity can be counted when determining if 10 full time jobs were created by each $500,000 invested? What kind of exit plan has the Regional Center proposed after 2 years have expired? What are the risk factors to consider in evaluating the exit plan? Is there a possibility that I will have no gain on my investment?

Step 4: If establishing your own business, in addition to building a business plan, you need to choose a location and legally organize in a state. Then begin acquiring data to support the projections in your business plan and data regarding competition the business will likely encounter. Make sure the business plan will create the 10 full time jobs. Before investing, it is wise to come to the U.S. to thoroughly investigate the actual environment where you expect to start your business. Will you have other investors in your business? Do you want, or need, persons from your country of citizenship, to become employers in your business?

Step 5: If you want to run your own business but will take over a "troubled business", the tasks are nearly the same. You need a substantial business plan but you do not need to create 10 new full time jobs. Your plan must show that you will maintain for two years the number of employees that the business previously had.

Each particular investment is unique and your main issue is whether you will get approved, and after two years will you be able to remove the condition. Review each investment and see if it looks like it will be successful and create 10 new jobs.