EB-5 Commentary

(Updated) The Cost of Raising Money via EB-5

Posted by Phil Cohen on Mon, Mar 23, 2015 @ 08:11 AM

describe the imageIf you are an entrepreneur looking to attract investors to your project, becoming an EB-5 regional center can create a very compelling reason for foreign investors to provide you with financing.

Many people, however, don’t fully understand the complexities of the EB-5 regional center application process, or the costs involved.  One can apply to become an approved EB-5 regional center through the U.S. Citizenship and Immigration Services (USCIS) using form I-924.

The filing cost of form I-924 is $6,230. However, many entrepreneurs don’t account for the other costs of a successful regional center proposal which include:

  • The services of an economist to provide the detailed economic impact analysis required by USCIS
  • The services of immigration, securities and business attorneys to develop and thoroughly vet the documents associated with the proposal
  • A detailed business plan outlining capital mix, return forecasts, exit strategy and other investment metrics
  • Possibly the services of a firm who will spearhead the management and coordination of your application
  • The services of an experienced EB-5 project manager are strongly recommended, especially for those new to the process
  • We also suggest that the regional center's website be up and running prior to the submission of an I-924

As a general rule of thumb, we encourage clients to anticipate a budget between $125,000 and $175,000 to get a full regional center application prepared and submitted, including the first 'exemplar' project plan. This cost can vary mostly according to the costs of the various professionals involved.

If a client wants to work with an existing regional center and not form their own, we would recommend budgeting between $70,000 and $150,000, in addition to the cost charged by the regional center (regional center charges and deal structures (as well as included services such as marketing) for taking on a project vary quite considerably.

Once approved, or at least once marketing starts, there are other costs to consider as well:

  • Agency fees for each successful investor (this is mostly the case for China, although agents can be found in other countries)
  • Marketing costs (including brochures, travel, DVDs, information packets, Powerpoint presentation, translation of materials, etc.)
  • Escrow fees, as appropriate
  • Insurance costs
  • Administrative costs for tracking and reporting to investors and USCIS
  • Interest to investors

Clearly there is much to consider when evaluating the ROI on EB-5, however, this is where an experienced team provides value in terms of saving unnecessary costs and avoiding pitfalls.

Understanding the Application Process

While the filing fee for form I-924 is a fixed cost, these other costs may vary depending on the size and complexity of your project and business plan. It’s important to understand the full scope of the application process to determine the costs involved.

Becoming an EB-5 regional center can be a powerful attractor for foreign investment, in units of $500,000 or $1,000,000.  The regional center designation can attract high net-worth investors that would otherwise not target your enterprise as an investment opportunity. However, the process of achieving this designation is not easy, and requires your full understanding to ensure success.

To fully unlock the potential of the EB-5 program, you need to arm yourself with the right information; ill-informed entrepreneurs can waste thousands of dollars and many hours trying to navigate the I-924 process.  Gain a full understanding of the EB-5 program with the EB-5 Definitive Guide.

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Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans, economic impact reports, feasibility studies and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com). 


Download Your Free Paper:  9 Things to Know  Before Going Down  The EB-5 Road

Tags: EB-5 Regional Center Application Cost, EB5 Regional center, regional center EB5, EB-5 Team, EB-5 investors, EB-5 Business plan, EB-5 Regional Center, EB5

Chinese EB-5 Visa Retrogression Shouldn't be Stopping You

Posted by Phil Cohen on Mon, Mar 09, 2015 @ 08:50 AM
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As a follow up to a blog article posted here on September 9th, 2014 (Some Deeper Implications of Chinese EB-5 Visa Retrogression), I want to reiterate what many in the industry are already saying in order to help quell some fears associated with Chinese visa retrogression and to help make sure that those who are new to the EB-5 community understand that retrogression is not the death knell of EB-5.

Retrogression does not mean that investors cannot have their I-526 petitions processed and approved. It only means that they won't get their green cards right away upon I-526 approval.

Retrogression probably does not mean that Chinese investors will lose interest in EB-5 any time soon, perhaps even the contrary.  If anything, the Canadian program demonstrated the propensity for Chinese investors to wait in line.  When the Canadian program was cancelled, there were over 60,000 investors in line, willing to wait up to seven years to be processed. Arguably, the EB-5 program might be slightly less of a draw because of the 'at risk' requirement, but being the only North American game in town worth mentioning these days in addition to the still-increasing base of HNW individuals in China I would suggest that there may well be a rush to get in line over the next 2 to 3 years.

Retrogression does not mean that projects should stop marketing in China, the source of 85% of EB-5 investors today.  For the reasons stated above Chinese demand is not expected to abate.  For the medium and longer term, however, those who expect to be involved in EB-5 for the forseeable future should expand their marketing horizons.  Bear this in mind, when developing your EB-5 business plan.

Retrogression does not mean that projects will be delayed in getting money into their projects (yet).  Funds can be released to a project upon I-526 approval and because there will be no additional delay in processing of I-526 petitions from Chinese applicants once retrogression kicks in, funds can be released on schedule.  Over time, this may change as the backlog grows.

 

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Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans, economic impact reports, feasibility studies and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com). 

 Download Your Free Paper:  9 Things to Know  Before Going Down  The EB-5 Road

Tags: capital raise, EB5 capital, Chinese Investors, EB-5 Project, EB-5 investors, I-526, USCIS, EB-5, EB-5 Business plan

Counting EB-5 Regional Center Jobs Outside RC Geographic Boundaries

Posted by Phil Cohen on Mon, Mar 02, 2015 @ 07:18 AM

describe the imageWhen formulating plans for the development of an EB-5 regional center, one should bear in mind that indirect jobs outside of the regional center's declared geographic area can be counted toward the EB-5 job creation requirement, as long as they are based on reasonable economic methodologies.

From the memorandum: “indirect jobs can qualify and be counted as jobs attributable to a regional center, based on reasonable economic methodologies, even if they are located outside of the geographical boundaries of a regional center.”

This clarification, which came about in the USCIS EB-5 Policy Memorandum of May 30th, 2013, has simplified some of the complications that people had been experiencing in relation to claiming indirect job creation when circumstances (and economic modelling) required that these jobs be outside the regional center's declared geographic area of focus.

As indicated in the memorandum, the key is to ensure that the justification for these jobs be based on reasonable economic methodologies.  Therefore if one is planning to claim jobs outside of a regional center's geographic area of focus, a conversation should be had early on with the economist on the team.  Furthermore, it is helpful to weave this justification into one's EB-5 business plan in order to present to USCIS a fully-rounded picture of the business as it pertains to EB-5 requirements.

 

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Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans, economic impact reports, feasibility studies and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com).