EB-5 Commentary

Why Use All-in-One Service Providers To Start EB-5 Regional Centers?

Posted by Phil Cohen on Mon, Feb 29, 2016 @ 11:26 AM

I often get calls from people who are new to EB-5 trying to understand the process and the details of starting an EB-5 regional center or project.EB 5 Service Providers resized 600

While the idea of calling around to industry experts appears to be commonplace, it may answer the initital questions but there are so many details and subtleties to the program that, inevitably, these new EB-5ers end up with more questions than when they started.

This is common and it speaks to the complexity of the program and how the rules shift for every specific situation. Calling around is not a bad idea to start, but be careful of taking it too far as differing opinions among professionals can end up in frustration for some.

Another approach for EB-5 newbies is to consider speaking to all-in-one service providers, who can bring the right set of seasoned experts to the table and spearhead the process of managing all the moving parts in a coordinated manner, typically at a price that is competitive with what one would get in trying to do it all themselves (without the benefit of project management that these providers offer).  All-in-one providers can identify problems and questions to be addressed, sooner rather than later.  They are also familiar with what is not available to most: the basis of various RFEs (requests for further evidence) from USCIS, from a long experience and history of researching what has occurred with other regional centers.

The cost to your overall development of getting an RFE or not getting it right the first time can far outweigh the cost savings one might get from trying to manage the project yourself. A good all-in-one shop will save most people considerable time and money in the long run, and will help put together a EB-5 project, business plan and application that not only minimizes the likelihood and/or severityof an RFE, but which can also help to avoid errors arising from (often subtle) issues that can hold up an entire project.  

The other key benefit of using an all-in-one provider is that they have a good view into the investor side of things as well, so not only will they help to devise a project and business plan (the heart of the application) with the strongest likelihood of approval, but they can also help you to structure details in such a way as to be as palatable as possible to investors. The fringe benefit is about 1,001 less headaches as well.

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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: EB5 Regional center, EB-5 explained, EB-5 investors, USCIS, EB-5 Regional Center, EB5

The Birth of The EB-5 Financier

Posted by Phil Cohen on Mon, Feb 22, 2016 @ 02:02 PM

New alternative ways to access EB-5 capital have been emerging for those who eb-5 financiers can help to raise capitalwant to find new sources of capital for their development projects without wishing to navigate the often-choppy waters of EB-5.

There are now an increasing number of both experienced and new financiers who are adding EB-5 capital to their lineup of options for raising capital for their developer clients.  These financiers will essentially take care of everything EB-5 for their clients while offering them the opportunity to access capital from EB-5 investors.  These EB-5 financiers will make capital available to their clients in a manner that is akin to financing models that adhere to common industry standards.

A New Twist

EB-5 financiers have already been in existence in a de-facto sort of way in the form of already-approved EB-5 regional centers who make their centers available to project developers for a fee, saving them the need to set up their own regional center. These EB-5 regional centers will offer varying levels of service ranging from simply offering developers a regional center ‘shell’ to work under, all the way to complete project management of the application process and getting the investors.  This approach, however, still leaves developers with a considerable amount of work and challenge in that they must often manage the approval of the project itself and it often leaves the developers to go and find their own investors overseas.  This might work for some, but others might prefer to have everything managed by another party in a way that is consistent, reliable and readily available for all projects.

Considerations when looking to submit a project under an existing regional center:

  • The developer has to find the ‘right’ regional center with the right approvals for industry and geography

  • The developer must do their due diligence on the regional center and its operators

  • Developers are still subject to the potential reputation impact on the regional center should another of their ‘sponsored’ projects fail

  • Each deal must be negotiated on a case-by-case basis, with each regional center manager wanting to approach things in a different way and offering differing levels of service

  • The main advantage is maintaining a certain amount of control of the fundraising process while removing the need (and time and expense) of attaining a regional center approval

Benefits of the EB-5 financier approach:

  • Bypassing the management of the often-tricky I-924 process

  • Developers can work with experienced financiers, who will properly vet projects according to industry standards

  • Developers can work with a financing model familiar to them

  • Developers benefit from not having to raise their own funds from individuals overseas (arguably the hardest part), instead relying upon the financier's already-existing network with overseas investors

When considering starting an EB-5 regional center, developers who do not wish to be distracted by the process may do well to consider this option.

If you have a regional center that you would like to make available to investors, call or email me to let me know, so I can add you to my list. Similarly, if you are a project developer looking for an EB-5 financier or just a regional center to work under, call or email me to let me know.

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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 explained, bridge financing, EB-5 investors, USCIS, EB-5, EB-5 Regional Center

What Does An Ideal EB-5 Business Plan Look Like?

Posted by Phil Cohen on Thu, Jan 14, 2016 @ 09:49 AM

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If you are a follower of this blog, you are likely already aware of the "Matter of Ho" business plan requirements as well as several other requirements that have been issued by USCIS via policy memoranda, RFEs (Requests for Further Evidence) and other unofficial statements. The question comes in, however, as to what level of detail is sufficient for a qualifying business plan.

Some attorneys and advisors are of the mind that a shorter business plan is better as longer plans by definition (in their opinion) are inherently committing the entrepreneurs behind the business to doing more, or at least that's the concern.

On the other hand, there are those who believe that longer plans with more detail give USCIS very little wiggle room when it comes to questioning details and issuing RFEs. We count ourselves in the second group and we believe that our record with RFEs proves the point. When we develop our business plans, we are of the belief that more detail is better, while at the same time we are careful to minimize forward-looking statements which would bind any entrepreneur to doing more than they would be committed to doing if they were to submit a shorter plan.

We believe that this approach works, not only because we rarely see RFEs for our business plan work, but also because we believe that preventative efforts to minimize RFEs go a long way for our clients in terms of helping them to avoid extra time and/or expense in getting their EB-5 projects approved if an RFE should be issued by USCIS.  Indeed, when we are asked to fix business plans written by others because of RFEs, we commonly see plans that provided too few details about important matters, leaving room for questions to form in the mind of an adjudicator.  

Thinking things through in detail is a way of forcing oneself to answer questions that others may have as well.  Similarly, a good business plan developer will provide that detail without over-committing the business to specific actions where it is not necessary to do so; rather, they will use the detail to make the business concept more convincing and to demonstrate that the entrepreneurs behind the business are experienced and serious about what they are doing.

The other reason that we err on the side of more detail, is that we are providing investors, who also see the plan, with enough backup information to give them comfort about the project and a level of security relating to their investment, making it an easier 'sell' for the entrepreneur.

True, longer plans do typically cost more, however, the incremental amount of investment for addressing this step thoroughly is minimal in the context of other professional costs and the cost of the whole process and the value of the benefits it can provide to the entrepreneurs and ultimately to the investors represents a considerable ROI in the long run.

The trick, from our perspective, is to assume that many readers are not likely to read every single detail of the business plan, so we structure the plan in such a way as to make it easy for the reader to find what they are looking for, and also to easily find any supporting detail, should they wish to dig deeper.

We suggest speaking to several service providers before making any decisions on your EB-5 team, however, given that a business plan is one of the least expensive (and key) parts of the process, we encourage anyone considering going down the EB-5 road to consider not just the price but the overall value the strongest-possible plan can deliver, both in terms of reducing the likelihood of an RFE and in terms of satisfying investor needs.  

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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). 

Tags: EB-5 center I-924, EB-5 explained, EB-5 investors, EB-5

A Reminder About Industry and Geographic Restrictions and Amendments

Posted by Phil Cohen on Wed, Nov 11, 2015 @ 01:33 PM

Here is a reminder regarding amendments, which is worth noting...

In its EB-5 Policy Memorandum of May 30, 2013, USCIS put forward an important change to this requirement. Therefore, when an EB-5 regional center wishes to expand its industry codes, it may now do so with an investor's I-526 submission.  As a result, the formal amendment process (and the very significant wait time that it used to imply) is no longer required as a separate action by the regional center.  The result is a considerably higher degree of flexibility afforded to regional centers who may wish to expand their geographic or industry sphere of focus.

There is, however, still value, however, to the formal amendment process.  The main value is that investors can be more certain of the approval of the new areas of focus when a regional center has received approval of a formal amendment in advance of the investor submitting their I-526.

Ultimately, for the regional center, it is a judgment call whereby the 'saleability’ of a deal would need to be traded off against the delays involved in seeking a formal amendment.

USCIS has also provided some indication (although this appears not to be definitive in how it was presented) that a regional center’s geographic area of focus may also be expanded via an investor's I-526 petition.  In order to do so the geographic area must be contiguous with the existing regional center boundaries and would require a justification for expansion to the new boundaries.  Similar to what has been described above for expansion of industries of focus, investors will be taking a risk that the justification provided will be accepted by USCIS.

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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). 

 

 

Tags: amendment application, EB5 Regional center, EB-5 explained, I-526, EB-5 Business plan

Heard About Flexible Adjudication to Save Time on EB-5 Projects?

Posted by Phil Cohen on Thu, Nov 05, 2015 @ 02:47 PM

As readers of this blog are likely aware by now, the rules flexible resized 600
and processes involved in the development of an EB-5 regional center application are relatively complex and often subject to interpretation by the lawyers involved and also by the adjudicators. 

As a result, in anything but the most straightforward of cases, an issue often arises around whether the question has been properly answered or whether certain rules apply in particular ways or in particular unusual circumstances.

When facing these kinds of unknowns, developers of EB-5 regional centers and EB-5 projects are often in the position of putting their best foot forward and hoping for the best when it comes to the adjudication of their I-924 application (or the project plan itself).  In these circumstances some project or regional center founders might find themselves in a dilemma in terms of whether to submit their business plans as "hypothetical" or as "actual”/"exemplar" plans.  The reason for the dilemma is that a hypothetical plan requires less detail to be approved but if one can have their plan approved as an exemplar plan then they can benefit from deference to this approval when their investors submit their I-526 petitions.

When unsure, there is the possibility of trying to get the maximum benefit of an exemplar approval without losing time should USCIS determine that there is insufficient information to approve the plan as an actual/exemplar.  The way to go about this is to make a written request when the project is being submitted that the plan be adjudicated as an actual/exemplar, but if this is not possible to adjudicate the plan as a hypothetical.

In most cases, this will not hold up the process and allow the entrepreneur to move ahead with the project as quickly as possible should they not be able to get actual/exemplar approval right away.  Saving the step of a re-submission can also save some of the costs involved in doing so.

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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 center I-924, EB5 Regional center, EB-5 Project, EB-5 explained, EB-5 investors, I-526, applications, EB-5 regional centers, I-924, EB-5, EB-5 Regional Center

Still Opportunities in the Crowded EB-5 Market for Great Deals

Posted by Phil Cohen on Fri, Oct 30, 2015 @ 07:22 AM

Many ChoicesBad EB 5 Deals resized 600

Over the last 3 years, the EB-5 program's popularity has exploded.  With the recent rush leading up to the September 30th, 2015 program deadline and a second 'mini' rush expected leading up to the temporary extension of the program to December 11th, the market is flooded with deals at the moment.  And yet, there is still opportunity for the strongest deals to succeed.

What Makes a Good Deal?

There are many factors that make up a good deal.  Investors are first concerned with getting their green card, which in turn means that the business has to create the jobs successfully.   Depending on which economic model is used and whether direct and/or indirect jobs are being claimed by the regional center project, investors may have to look at different factors to determine the likelihood of job creation, as presented by the project in their EB-5 business plan and economic impact report.

Because investors are also concerned about the preservation of their initial investment capital, it helps considerably to either have a deal with a strong collateral base or a very strong likelihood of the business's success (which is preferred over collateral).

Another key element to a good deal is not only the number of jobs to be created (with a sufficient buffer over the required amount) but also the likelihood that the project will be able to create those jobs. One great example of this comes in the form of bridge financing. Bridge capital can be used to move a project forward before EB-5 investors come in, which enables a project to show the development that is already underway, which in turn gives investors additional confidence.  More importantly, bridge financing allows a project to spend money (that is used as an input in the economic model) before investors come on board, which effectively means that job creation has effectively been fulfilled (to the degree that the money spent comprises the input in the model) before EB-5 investors come into the deal.

It is also helpful if there is an opportunity to have backup exit financing in place for a deal ahead of time that will help a project to relieve EB-5 capital at the time of the investor's exit.

There are a multitude of factors that come into play in defining what comprises a good deal. Many of these factors would be sought by any investor, let alone an EB-5 investor, however, there are  unique deal elements sought solely by EB-5 investors.  Many of these factors play off against each other, making for a relatively complex dynamic which must be balanced by any regional center or project owner wishing to raise capital successfully.

It is also worth noting that the program's allowance of job creation via 'tenant occupancy' or 'troubled business' designations affords additional opportunities for job creation, however, these approaches have proven to be difficult to get approved.  Because these are technically difficult for a project we, and many others in the industry, tend to advise clients to avoid them.  Simpler is better.

How to Strike a Balance That Sells

The best way to establish a deal that will sell to investors is to make oneself aware of the various possible permutations that can be considered in terms of structuring a deal and finding a combination that fits the deal and also suits investors.  Players who are newer to the game will have to offer more favorable terms to investors compared with regional centers or project owners who are more established and can offer deals that may not be as strong but will still be preferred by investors simply because of the reputation of the regional center or the project team.

Those wishing to start an EB-5 regional center or EB-5 project would be well advised to check with their advisors regarding what kinds of additional factors play well with investors in order to develop the right mix.

Why go to the trouble and expense of setting up an EB-5 regional center and project if your deal will not resonate with EB-5 investors?  Take the appropriate steps to ensure that you are not one of the many EB-5 regional centers who end up being inactive.

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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: EB5 Regional center, regional center EB5, regional center EB-5, EB-5 explained, EB-5 investors, EB-5, EB-5 Regional Center

Using Escrow in EB-5 Projects

Posted by Phil Cohen on Tue, Sep 15, 2015 @ 02:30 PM

describe the imageMany EB-5 regional center projects these days no longer wait for approval of their exemplar or hypothetical project business plans before releasing EB-5 investors' funds to a qualifying project.  This approach may work for some, but when starting an EB-5 regional center or project it is recommended to think twice first.

Avoiding escrow represents an additional element of risk as far as investors are concerned because the investor does not get the benefit of knowing whether there might be an RFE issued by USCIS for this particular EB-5 project before their funds are committed (and accordingly, what the nature of that RFE might be).  Typically, the best recommendation from the investor's perspective is for new EB-5 projects or regional centers to make use of escrow so that the funds may be held in trust while USCIS's review of the project business plan is pending.  Over time, as the EB-5 regional center and/or project manager builds its reputation for delivering for EB-5 investors, it might make more sense to ask investors to take this 'leap of trust,' although these projects will always be up against other choices that do make use of escrow.

Some EB-5 regional centers might make use of other options.  For example, one option is to release a portion of the funds immediately to the project and another portion later, when the investor's I-526 application is approved.  This approach mitigates some risks for both sides but also poses some risk for both sides.  For example, if an investor is denied their I-526 application they will have committed half their funds to the project already by this point. Depending on the terms of the agreement, the funds that have been committed may not be refundable to the investor which would obviously be a concern for them.  This is not ideal for the investor, but at least in this scenario the risks are shared by both parties.

It is always a bit of a balancing act for EB-5 regional center and project founders to come up with a deal that allows them access to capital without having to wait nine months or longer, while the regional center's I-924 or exemplar, actual or hypothetical I-526, is reviewed by USCIS.  In this time other project fundamentals may change, resulting in new challenges to the project's overall success.  At the same time if investors perceive too high a level of risk, they may simply look elsewhere.

To compound this challenge, the ground is constantly shifting within the EB-5 world itself, with long processing times, changing policies or directives from USCIS and a rising number of established and reputable regional centers developing proven track records.

We advise our clients who are starting EB-5 regional centers to consider reputation first in order to be able to make use of the EB-5 program in the future.  As one's reputation becomes established and re-proven, the time to win over investors will very likely be shorter in the future as the market comes to consider a given team as a known quantity with demonstrable results.

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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 center I-924, capital raise, EB-5 Regional Center Application Cost, regional center EB5, EB-5 explained, program, EB-5 investors, EB-5 regional centers, EB-5 Regional center processing times, EB-5, EB-5 Regional Center, EB-5 Regional Centre, EB5

Building, Buying or 'Renting' an EB-5 Regional Center: Which is Best?

Posted by Phil Cohen on Thu, Sep 10, 2015 @ 07:14 AM

starting an eb-5 regional centerWhen looking to start an EB-5 regional center one can launch a new regional center from scratch, make a deal to use an existing one or alternatively if the stars are aligned, one can look to purchase an existing regional center (likely one that is inactive).

The risks of starting a new regional center from scratch generally include the time and expense of doing so.  However, if starting a new regional center then the regional center's founder is assured of a clean slate and of having a regional center that exactly suits their needs.

On the other hand, if one wants to buy an already-existing regional center, one may do so if the right opportunity is available.  The right opportunity should generally mean that the regional center in question does not have a tarnished reputation, that they are approved for the industries in which the project would like to operate and that the regional center is approved for the appropriate geographic area of focus.  It is worth noting that the recent policy memo issued by USCIS now states that geographic area can be amended at the I-526 stage (when the investor submits their petition), although this means that investors will be left uncertain as to whether this might actually happen until their application is adjudicated and the details of this policy change remain unclear. Another important note regarding buying a regional center is that while the entity itself can be purchased, a formal amendment would be required to allow the new owners to operate the regional center in question.

If one wants to start an EB-5 regional center by purchasing an already-existing entity, they should look first for the right territory (or a regional center that borders on the territory to which they would like to expand).  One way that this can be done is to research approved EB-5 regional centers on the USCIS website.  The website will indicate in what state that EB-5 regional center is operating.

Alternatively, to determine the specific geographic area and the industries of focus, one approach is to make contact with the regional center itself.  As a first step, one might explore the prospective regional center's website (if there is one) to see if they have posted their initial approval letter, which will outline the geographic area of focus and the approved industries. In the event that any changes to geographic area of focus or approved industries would be required in advance of submitting any I-526s, the regional center would need to file an amendment application with USCIS.  Filing an amendment may be a little simpler than filing for a new regional center, although the time it takes USCIS to approve an amendment may be just as long as filing for the regional center in the first place.

If a prospective EB-5 regional center has been identified, the next step would be to contact the regional center to discuss with them how active they are and whether they might be interested in selling the entity.

The biggest challenge overall in purchasing a regional center is assessing the reputation of the regional center itself and whether they have had any issues in relation to a bad history with investors or a past reputation that was somehow negative.  If one has the resources to do this, purchasing a pre-existing regional center may be a viable alternative that can save potentially months of time that it might otherwise take to develop and file a properly composed EB-5 regional center I-924 application.

In another blog article I discuss the notion of using an existing regional center as a sponsor of a project, sometimes called 'renting' a regional center.

 

 

 

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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: amendment application, EB-5 center I-924, EB-5 Regional Center Application Cost, EB5 Regional center, regional center EB5, EB-5 explained, EB-5 investors, USCIS, EB-5 regional centers, EB-5 Regional center processing times, I-924, EB-5, EB-5 Regional Center, What is EB-5?, EB5

The Importance of Feasibility Studies for EB-5 Projects

Posted by Phil Cohen on Tue, Jul 07, 2015 @ 02:44 PM

Feasibility studies are becoming more and more commonplace in the EB-5 world to prove the feasibility and plausibility of a given EB-5 regional center project.  This isEB5 regional center application resized 600 especially true for larger projects but also for projects where feasibility studies are common, such as in the hotel business, but it is becoming more common for almost any EB-5 project.

When things become common in EB-5, the community often starts to treat them as (essentially) expected by USCIS in order to be safe. Indeed, when it comes to increasing the professionalism of what is being presented for an EB-5 project, USCIS seems to follow suit as often as not. Indeed, some recent RFEs have asked for formal feasibility studies.

Using a feasibility study developed by a reputable source is the best form of market, competitive and overall plausibility analysis for the project in question, minimizing any reason for USCIS to respond with an RFE for these particular points. In our business we consider it a best practice and strongly recommend that our clients make the investment in these analysis reports where it is reasonable to do so.

Always seek to maximize your odds of success the first time when it comes to starting an EB-5 regional center and/or project application.  Feasibility studies can help to save processing time and money in the long run and are adding an extra layer of safety for those looking to get project approvals before the upcoming September 30, 2015 sunset (and expected renewal) date for the EB-5 program, and looking to stay ahead of the possibility of needing to comply with proposed changes to the program upon renewal that would result from the Grassley-Leahy bill, should it be passed in its current form.  Of course, the added overall benefit is providing an extra element of credibility to your investors.

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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 center I-924, EB-5 Regional Center Application Cost, EB5 Regional center, regional center EB5, EB-5 Team, regional center EB-5, hotel, EB-5 explained, EB-5 Regional center processing times, I-924, EB-5, EB-5 Regional Center, What is EB-5?

The Risks and Rewards of EB-5 Investment

Posted by Phil Cohen on Thu, Jun 04, 2015 @ 10:46 AM

Risk and Reward

While EB-5 capital is commonly used for mezzanine capital by the companies raising funds, the investors essentially face a venture capital-level risk profile. When considered in this way, the return in dollars to an EB-5 investor is considerably below market for this risk profile.  This is no secret and it is the model that the industry has settled into, for the most part.  This model appears to make sense for all concerned since the investors get the added benefit of a path to US citizenship if the businesses create the requisite jobs, giving them enormous perceived value for their investment, while at the same time the project developer faces additional risk, time and cost in setting up a project to fit the EB-5 program.

With this view in mind, one should remember that venture investment is inherently risky, ask any venture capitalist.  Even better, have a look at venture capital funding lists to see the kinds of businesses that get funded every day by seasoned investors, some very odd and seemingly risky businesses indeed.  According to a September 2012 Washington Post article, “About three-quarters of venture-backed firms in the U.S. don't return investors' capital, according to recent research by Shikhar Ghosh, a senior lecturer at Harvard Business School”.  By comparison projects that I’ve seen available via the EB-5 program today would seem to be far less risky than that, on the whole.

This is not to say that some deals in the EB-5 marketplace do not, in some cases, put forward overly aggressive projections and/or assumptions, but this is true of many businesses seeking funding, whether they are seeking EB-5 capital or not. Like for any business investment, investors must thoroughly investigate the EB-5 project's business plan, claims being made, the team and even the companies who are representing the deals.  This can be done in part by feasibility studies or by other consultants who specialize in project reviews, feasibility studies or the like.

Managing Risk

Are there people with bad intentions in EB-5?  There is no doubt that there are people out there who might come to think that investors will be blinded by the possibility of attaining a green card and will fall for a bad deal without looking at it too closely.  While this is not true for the great majority of EB-5 deals that this author has seen, nobody can say that it hasn't happened.

Should an investor be careful in making an EB-5 investment? 100% and unequivocally yes! Investors must investigate any project that they are looking at investing their hard-earned dollars into and this cannot be stressed enough.  Every deal has pros and cons and good and bad elements and the investor should weed out all the risks for themselves (or get a knowledgeable consultant who can help them) so that they can make a decision that they are comfortable with.   Will there be deals out there that don’t succeed? Likely so; it is a free market after all and the statistics for failures of new businesses in America show relatively high numbers. It would be safest for investors to assume that EB-5 deals would not be different on the whole, although EB-5 deals are often brought to market by experienced teams and the author does not believe that EB-5 business failures are even in the same ballpark as published statistics on the whole.

There are many deals for EB-5 investors to choose from today and investors must choose the project and risk profile that suits them best, and again, they absolutely must investigate any business deal, EB-5 or not.  I have seen investors willing to take undue risk in their EB-5 investments in their eagerness to move themselves toward the opportunity to participate in the American dream.  Spending more time to check out every detail, however, will help to ensure that the investor can choose an investment leads the desired result with the least amount of risk.  So EB-5 investors don't rush, investigate everything and then make the choice that you are most comfortable with.

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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). 

 

Tags: capital raise, EB-5 Team, EB-5 Project, EB-5 explained, EB-5 investors, EB-5 regional centers, EB-5, job creation