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The EB-5 Immigrant Investor Program has made a positive contribution to the U.S. economy since its establishment in 1990. It enables investors from any country to relocate to the United States by making a qualifying investment in an EB-5 project. The EB-5 investment program has brought significant benefits to the U.S. economy, including the generation of jobs for thousands of U.S. workers and billions of dollars of capital.
The advantages business owners can gain from participating in the EB-5 investment program have been highlighted during the economic difficulties caused by COVID-19. As other sources of funding have become scarcer, the convenience of secure capital from an EB-5 investment is especially valuable to small businesses.
While pandemic conditions contributed to some delays for foreign nationals planning to relocate to the United States through the EB-5 program, the popularity of the program remains strong. In fact, the program is now accessible to more potential investors than it had been in recent years. The reversal of the Modernization Rule in June 2021 led to a reduction in the minimum investment thresholds to $500,000 for projects in targeted employment areas (TEAs) and $1,000,000 for non-TEA projects. Consequently, EB-5 business owners now have a larger range of potential investors.
However, EB-5 project developers need to be aware that United States Citizenship and Immigration Services (USCIS) sets out strict regulations for EB-5 businesses. When creating an EB-5 project, it is recommended that business owners consult with experts in the industry and craft a strong, feasible business plan.
Guiding Principles for an EB-5 Business Plan
Strong business plans serve two major functions related to EB-5 investments. The first is to demonstrate to USCIS that the project complies with EB-5 regulations and that it will succeed. The second function is to attract investors. While potential investors will want to ensure that the project is EB-5-compliant, they will also be evaluating the risk involved. A strong business plan is essential to persuade foreign nationals to invest.
The standards for an EB-5 business plan were defined in the Matter of Ho court ruling from 1998. USCIS checks a business plan’s compliance with these standards when they adjudicate an investor’s Form I-526. If USCIS determines that the business plan does not follow the guidelines from Matter of Ho, they may deny the visa petition.
Based on that court ruling, EB-5 business plans should contain the following four elements.
Financial Projections
An EB-5 business plan must contain economic data illustrating the first five years of the project’s operations. This data is needed to convince USCIS, and potential investors, that the project is financially viable and likely to succeed. The EB-5 business owner must provide third-party sources or objective data to support these projections.
Employment Creation Plan
Under USCIS regulations, each EB-5 investment must generate a minimum of 10 jobs for U.S. workers. The business plan should demonstrate how these jobs will be created, including the number of positions to be created, detailed job descriptions, and a recruitment schedule.
Prospective investors examine the job creation projections of a project carefully when deciding whether to invest. EB-5 projects that offer a job cushion—that is, they expect to create far more than the minimum 10 jobs per EB5 investment—are often more attractive to investors because of the reduced immigration risk.
Licenses and Permits
The success of a project depends on it receiving permission to undertake its activities. EB-5 project developers must ensure they have all the permits and licenses required for the project to operate lawfully. The details of these permits must be noted in the EB-5 business plan.
Marketing Approach
Of course, a project cannot succeed in securing EB-5 investment funding if it fails to market itself to potential investors. The EB-5 business plan must include details on how the business plans to attract its overseas investors.
Creating well-designed marketing materials that convey key points about the project is an important step. Business owners should consider how they plan to distribute those marketing materials to their target audience. Some EB-5 projects also work with foreign migration agents, who can liaise on their behalf with potential investors in specific countries.
The process of preparing a successful EB-5 business plan can be a challenge. As USCIS approval and investor interest depend on this document, it is important to get it right. It is prudent for EB-5 business owners to consult with EB-5 experts and learn from their invaluable advice at this stage in the process.
