EB-5 Investment Options 2020
Considering applying for an EB-5 Immigrant Investor Visa in 2020? Discover the investment pathways available to you under the USA EB-5 Program, or contact us for a free consultation.
Choosing the right option for you
Making the correct choice in terms of your EB-5 capital investment is pivotal. South African investors have the option to make a capital investment of $900,000 or $1.8 million into a range of sectors and industries, including hotels, manufacturing, agricultural development, medical services facilities, retail, restaurants as well as casinos and stadiums.
Regardless of industry, the EB-5 Visa Program requires investments that will create at least 10 jobs for American citizens and green card holders, excluding the EB-5 investor and they’re family members. The one investment path exempt from this requirement is the Regional Center based investment route, where a certain volume of “indirect” job creation is assumed.
What are the available EB-5 investment options in 2020?
The following 5 investment options are frequently considered by prospective EB-5 investors from South Africa, Africa and further afield:
1) Direct EB5 investment (New Enterprise Investment)
Given the increasing complexity, delays and widely reported risks around Regional Centre based EB-5 investments, the Direct Investment pathway to US residency is increasingly being favoured by immigrant investors.
In order to take the Direct Investment pathway, applicants must make a capital investment of $1 million directly into a new enterprise, unless the business is situated in a Targeted Employment Area (TEA). A TEA is defined as a Rural Area, or an area which has experienced unemployment of at least 150% that of the national average.
For such ventures, the investment requirement is $1.8 million , either in the form of preferred equity or common shares.
A key difference between direct and indirect EB-5 investments is that direct applicants must be able to prove the creation of 10 full time positions (W-2 employment positions) within two years of the visa petition’s approval.
This involves being able to prove said positions’ existence by means of payroll and tax submissions. Addition requirements include being able to prove the establishment of a new business enterprise, the investor’s involvement in managing the enterprise, as well as that the business is located within a TEA.
Another key benefit of the Direct Investment pathway is the fact that it eliminates any reporting requirements pertaining to indirect and induced job creation, however it still requires the submission of comprehensive and viable business plans.
2) EB-5 Regional Center Investments (Indirect Investment)
According to the USCIS definition, a Regional Center is an economic unit, either privately or publicly owned, that promotes job creation and economic growth, boosts regional productivity and facilitates domestic capital investment from foreign investors.
Fewer pre-approved EB-5 Regional Center opportunities have been coming onto the market in 2018, driven by the fact that the timeframes for project pre-approvals have become unrealistic from an application timeframe point of view.
As has been the case with numerous Chinese EB-5 investors, their investment loans became repayable before they could obtain their permanent green cards, forcing investment facilitators to find new investment opportunities in order to keep these applicants’ capital investments “at risk” throughout the application process. (The latter is a key USCIS requirement for applicants.)
Additionally, the USCIS has revisited its position pertaining to project pre-approvals, and has indicated that it no longer considers itself bound by issued pre-approvals, creating the risk of delays and significant administrative challenges for prospective EB5 investors.
Regional Center Investments start at $900,000, provided the investment project is located within a TEA.
3) Investing in a Troubled Business
According to current precedents at the beginning of 2019, a “troubled business” can be defined as an enterprise that has incurred net losses for at least 2 years prior to the priority date specified on the EB-5 applicant’s Form I-256, Immigrant Investor. The loss during the period in question must have amounted to at least 20% of the business net worth prior to the incurred loss.
In terms of the minimum investments required, a capital investment of $900,000 or more is required if the distressed business is located within a TEA. If not, the minimum investment requirement is $1.8 million. While job preservation does, in this instance, count towards the job creation target, the combined number of jobs created or preserved, in combination, must still be at least ten.
As is the case with new enterprise investments, the immigrant investor must be able to provide proof of being actively involved in enterprise management activities within the distressed business.
4) Expanding an Existing Enterprise
In many instances, growing an existing business is significantly easier than starting an enterprise from scratch. That’s why many prospective EB-5 investors opt to invest in a running concern, rather than launching a brand new one.
Taking this investment pathway, immigrant investors are required to grow the business’ worth and its staff head count by at least 40%. Again, the minimum number of jobs created must be 10 or more.
5) EB-5 Investment Pooling (New Joint Venture Enterprises)
In a range of businesses and industries, scaling the initial capital investment can create a significant competitive advantage for new businesses. That’s why many immigrant investors find the Investment Pooling option highly appealing. While this investment approach does hold several advantages, all investors must still meet the requirement of creating 10 jobs each, on average. As with the other investment pathways, the minimum investment requirement per applicant is $900,000 within TEAs, and $1.8 million outside of these priority areas.
EB-5 investments requirements are going up imminently. Contact us now to get your application process started to avoid disappointment.
Under the Trump Administration, EB-5 investment requirements are busy going up, with more onerous application requirements being imminent in 2019. With only 10,000 EB-5 Visas issued per year and demand growing massively, you’ll need to act today to get in before application retrogression starts affecting South Africa.
Contact us now for a free consultation and get started on actualising your American Dream today.
LEGAL DISCLAIMER: EB-5 Investments carry a large degree of risk, and no investment decision should be made within consulting a specialised and reputable financial advisor. The above information was deemed accurate and correct at the time of publication, and is intended to serve as general informational content on the subject only. The publishers of this article will not be held liable for any losses or damaged incurred as a result of reliance on the above information, whatsoever.