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Due Diligence for EB-5 Investors
EB5- Investors Due Diligence
Despite the fact that EB-5 investors come from a variety of professions and are typically familiar with doing due diligence in their respective industries, many are unclear how to proceed with due diligence in the unique EB-5 setting. Investors must do two levels of due diligence in the regional center model, the first on the EB-5 project and its developers, and the second on the regional center itself. Due diligence can offer an estimate of the likelihood of successful immigration under the EB-5 program based on the track record of the regional center, in addition to helping investors to better safeguard their assets.
This article explores the significance of due diligence in the context of EB-5 investments and lists five questions investors should consider when performing due diligence on possible investments.
EB-5 Investors’ Investment/Project Concerns
Two major problems EB-5 investors have. The first question is whether investing in an EB-5 project will provide them with permanent residency in the United States. The second consideration is whether a project will produce a return on investment.
Investors must file two visa petitions under the EB-5 program. The first step is to file an I-526 petition for conditional permanent residence after making the first investment. This establishes the source of the investment money and indicates to US Citizenship and Immigration Services (USCIS) that the project will be capable of providing the minimum 10 full-time employment in the US for each investor. At the end of the two-year residency period, the investor files the I-829 petition for the removal of the conditions of permanent residence and must present confirmation that the EB-5 project met the program standards established in the I-526 petition. This procedure takes around six years, although investors from China may have to wait longer due to current visa retrogression worries.
Aside from determining whether a project would be financially viable during the visa application time, investors must also consider if the new commercial firm founded under the program will be able to return the investment amount afterward. This is often a substantial figure of $1,050,000, or $800,000 if the business is located in a targeted employment region, so investors are naturally apprehensive of entering into a loan deal without a solid guarantee that they will be reimbursed at the appropriate moment.
Due diligence in establishing a project’s feasibility is thus critical in the EB-5 scenario.
Investor Due Diligence Questions
When completing due diligence, an investor must take various variables into account. First, he or she must assess the regional center’s track record of success with USCIS, as well as its capacity to manage a project that will yield a return on investment. When researching a regional center in this regard, investors should consider the following crucial concerns.
1. Has the regional center historically aided in the effective processing of visa petitions?
A regional center should be able to tell investors how many prior investors have successfully filed visa requests. If any past investors were refused permanent residency, the center should be able to offer genuine grounds for those denials as well as demonstrate that it has taken efforts to avoid similar complications in future requests. Investors should bear in mind, however, that petitions are occasionally dismissed for reasons unrelated to the regional center, such as when there is a problem with the source of investment funds.
2. How long has the regional center been open for business?
Investors should check into when USCIS recognized the regional center as such and whether it has previously managed any projects. A regional center that has dealt with the special challenges concerning EB-5 projects and finances will be able to account for the areas of attention of USCIS visa petition adjudicators and will also have the expertise and ability to deal with any issues that occur. Because the USCIS has lately began scrutinizing regional centers that have not reached the EB-5 program’s goals, a proven track record increases the likelihood that the regional center will continue operating throughout an investor’s conditional residence.
3. Has USCIS authorized the project?
The initial visa petition for an EB-5 project includes an additional level of USCIS evaluation of the project’s business plan and economic impact study. This extends the petition’s adjudication period, and hence investors may benefit from investing in a project after it has already passed the initial USCIS assessment. For possible investors, the regional center should be able to validate the project’s status. Aside from that, a project may need a variety of licenses or permissions, and investors should ensure that these have been obtained to avoid extra delays after committing cash.
4. Is the project capable of supporting the requisite number of jobs?
To be eligible for an EB-5 visa, each investor must demonstrate that his or her investment has resulted in the creation of 10 full-time jobs in the employment region. As a result, regional center projects with several investors must carefully plan job creation to guarantee that each investment gets credited with the exact number of employment. Investors must carefully analyze the project documents to verify that developers have incorporated a suitable buffer in terms of job creation. A project should not seek to produce only 10 jobs per investment, as this may leave investors short if contingencies impact the amount of employment created.
5. Does the regional center have a plan for redeploying investment funds?
Because the investment amount must be kept at risk throughout the conditional residency period, regional centers must carefully consider the likelihood of a loan being returned early. One possibility is to deny borrowers the ability to repay the loan until the I-829 petition is resolved. Another alternative is for the regional center to reinvest any refunded investment money immediately into another project to guarantee they stay at risk for the required period of time. Investors should speak with a financial professional to evaluate which approach is best for them.
Consultation with EB-5 Professionals
When doing their due diligence, investors benefit from engaging with specialists that are familiar with the EB-5 program’s criteria. A financial adviser may assist an investor in protecting against the danger of fraud or deception in a project, as well as give essential financial advice to assist the investor in negotiating advantageous loan and repayment terms. Similarly, an immigration attorney will work on behalf of the investor with a regional center to acquire documents for the I-526 and I-829 applications. This contains the project proposal, financial accounts, and proof of funding documentation, as well as payroll records and other evidence of employment creation.
Investors acquire the capacity to make educated investment decisions and boost their chances of a successful visa petition by doing due diligence on regional centers and projects. Due to the high stakes in terms of both the investment amount and the investor’s and his or her family’s permanent residence in the United States, due diligence is critical in supporting investors during the planning phases and allowing them to participate in EB-5 projects with confidence.
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