For too long there has been a prevalent myth surrounding the EB-5 visa. This myth states that single investors or operators whom are looking to start a U.S. business and subsequently earn their green card are likely to take direct investment projects. The myth goes on to extrapolate that larger multi-investor projects, which incorporate the “loan model” are favored by regional centers. While there are grains of truth to this myth, the reality is that there is noting in any of the regulations that would prevent direct investment projects from leveraging multiple investors rather than the previous assumption that only single investors or operators could be on these projects.
Examining The Regulations
It is true that regional center projects have historically been more popular in the EB-5 space. However, from a legal point of view, direct structures could enjoy the same opportunities. As seen by an EB-5 lawyer, all investments must meet the requirements of the EB-5 direct investment program. Meeting the requirements includes fulfilling the legal regulations for direct investments, which state:
- Direct investment projects can subscribe multiple EB-5 investors,
- Direct projects can loan the EB-5 funds to several wholly owned project subsidiaries,
- The required jobs can be created by the project subsidiaries.
With these regulations in mind, it would appear that an EB-5 investment from multiple investors can be accepted so long as the job creation is in proportion to each investor. For example one investor to 10 jobs, two investors to 20 jobs, and so on. It would thus appear that the direct investment model is more flexible than was previously thought.
On the other hand, regulations concerning regional center models address the aforementioned direct investment regulations. In addition, the regional center regulations eliminate the wholly owned subsidiary requirement and implements a provision for indirect job creation within the boundaries of “reasonable methodologies.”
Concluding Thoughts on EB-5 Direct Investment
In today’s market developers must use the EB-5 visa program to raise large pools of low cost, low interest capital. The downside is that projects which rely on buying and developing land do not have the guarantee of creating jobs. As such, regional center projects, which have a provision for indirect jobs, are the model that investors continue to be most comfortable with. However, spreading out the capital and creating the minimum required jobs can still be a budget-dissolving and efficiency challenge. With these conclusions in mind, the myth regarding EB-5 direct investment can easily debunked by a knowledgeable EB-5 lawyer at David Hirson & Partners, LLP. David Hirson & Partners, LLP has over 30 years of experience in immigration law. Managing Partner, David Hirson is a nationally recognized EB-5 investment immigration attorney. For more information on EB-5 contact David Hirson & Partners, LLP via phone 949.383.5358 or email [email protected].