EB-5 Commentary

Grassley-Leahy EB-5 Bill: Not Passed But Affecting The Market

Posted by Phil Cohen on Fri, Sep 04, 2015 @ 07:07 AM

proposed eb-5 bill grassley leahyAs anyone in the EB-5 space is likely aware by now, Senators Charles Grassley and Patrick Leahy have introduced a bi-partisan bill to amend the EB-5 Immigrant Investor Program.

While the prevailing sentiment in the industry is that the bill will not be passed in its existing form, there is some debate as to whether or not some of the proposed program changes in the bill may be passed and whether the program may be temporarily extended for a shorter time while additional changes are considered.

In light of this, it is worth noting what impact the bill is having on the marketplace. At the time of the last renewal date three years ago, there was some degree of rush to get applications in across the industry, but there were few who doubted that the program would be renewed and there were no proposed changes to the program that anybody was aware of at the time. In addition, at that time, there were far fewer approved regional centers and projects in the marketplace (209 approved regional centers at the end of the 2012 fiscal year versus 949 approved regional centers today). The overall result two years ago was largely that things were business as usual.

This time around, things are a bit different. Because of all the unknowns surrounding the bill, professionals in the industry are largely overwhelmed with the demand to get projects in under the deadline. This activity is currently nearing a peak. Many projects that were closer to being ready have been sped up and already launched into the marketplace.

We are already hearing that many Chinese agents who might normally take on just two or three projects at any given time are now four and five projects deep, some commanding larger fees than usual because of the abundance of offerings. As the industry overall appears to be working hard on getting many other projects to market, we are anticipating that there may be a glut of projects coming up. Marketing activity is expected to reach a frenetic pace in the coming months as agents and other marketers jockey for position and mind share of investors.

On the flip side, this author anticipates that there will be a bit of a lull in the launch of new EB-5 projects into the marketplace following September 30th, as those projects that did not get started in time will be waiting on the sidelines to see what, if anything, changes on the 30th and whether the program will be only temporarily renewed (with only some or no changes), setting a new deadline for the next rush before a second wave of changes comes along.

2016 may prove to be a roller coaster year for EB-5.

 

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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: regional center EB5, Chinese Investors, EB-5 investors, applications, USCIS, EB-5 regional centers, EB-5, EB-5 Regional Center

The Importance of a TEA for EB-5 Regional Center Projects

Posted by Phil Cohen on Thu, Jul 30, 2015 @ 06:38 AM

Why a TEA?TEA Target Employment Area resized 600

A question often asked of EB-5 professionals is, "why should I seek to have my EB-5 regional center in a TEA (Targeted Employment Area) if it only reduces the investment requirement for EB-5 regional center investors, meaning that I will need to find more investors to raise the same amount of money?"


Simply put, the answer is the saleability of your deal.  EB-5 regional center investors have to put their capital at risk for a period which is usually at least 5 years and for returns that are below market for a comparable level of risk.

For these key reasons, EB-5 regional center investors seek to invest the lowest possible amount in a given project.  As a result, most EB-5 regional center projects are put into TEAs and projects that are not at a disadvantage, unless they are able to entice investors with other benefits.

New Legislation Proposed

It is worth noting that the proposed Leahy-Grassley bill could have an impact on how a TEA can be devised and its impacts on EB-5 investment. While the prevailing sentiment in the EB-5 industry is that the bill will not be passed in its current form, some or all of the proposed changes (or amended versions of them) could come into effect. These proposed changes include:

- A TEA would need to be an area consisting of a single census tract that has 150% of the national average unemployment rate (or a closed military base or a rural area).
-TEA designations would apply for two years instead of the current one.
-For TEAs based in a Metropolitan Statistical Area or Combined Statistical Area, at least 50% of a project's job creation must be within that Metropolitan Statistical Area or Combined Statistical Area to be counted.
-If a TEA is outside of a Metropolitan Statistical Area or Combined Statistical Area, then at least 50% of the jobs must be created within the county in which the TEA is located; if not, the total number of jobs will be reduced until the 50% threshold is met.
-The minimum investment amount for projects based in a TEA would increase to $800,000.

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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). 

 

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Tags: Target Employment Area, EB-5 investors, EB-5, EB-5 Regional Center, EB-5 Regional Centre, EB5

Pros & Cons of Different EB-5 Business Plan Types

Posted by Phil Cohen on Mon, Jul 20, 2015 @ 11:42 AM

For those considering making an EB-5 investment, you will no doubt hear of three different kinds of EB-5 business plans: hypothetical, actual and exemplar. Each kind of business plan has different benefits and drawbacks from the investor's perspective. This article will provide a brief explanation of each type of business plan and what it means to investors.

Any kind of EB-5 business plan could be submitted alongside a regional center application, while a so-called 'direct' application requires the use of an exemplar EB-5 business plan.

Hypothetical

A hypothetical EB-5 business plan is a plan that provides an approximate overview of the project in question. The details required for a hypothetical plan are usually very high level and non-specific. Details in a hypothetical plan can include economic model inputs, feasibility study or information and general proposals and predictions. The benefit of using a hypothetical plan is that it allows the project owners to move more quickly in terms of getting their project financed, which adds to overall project stability. On the downside, however, investors should be aware that when a hypothetical plan is used, a more formal or exemplar plan would need to be submitted with the project's first investor (I-526) application. From the investor perspective, this means that the business plan is effectively being reviewed and approved by USCIS for the first time with the first investor's I-526. If an investor is among the first to apply for an I-526 under a given project which uses in an exemplar plan, the project would effectively be reviewed for the first time by USCIS at that time. Subsequent investors in a given project would likely benefit from USCIS giving deference to the project approval based on the first investor's approval.

Actual

An actual EB-5 business plan is a more or less complete plan although it may be missing some critical pieces such as offering documents. The pros and cons of an actual plan from the investor perspective are similar to those of a hypothetical plan, although presumably USCIS will review the information that is in front of them with regard to the plan itself. Although the project would not benefit from a formal USCIS approval, project developers would benefit from having feedback from USCIS on what was submitted. In effect, this means that the risk to the investor of the project itself not being approved at the I-526 stage is smaller than in the case of a hypothetical plan.

Exemplar

An exemplar plan is a complete plan, which includes offering documents, transactional documents and evidence that the project is shovel ready (i.e. ready to start right away). When USCIS accepts an exemplar plan, it is very unlikely that the plan itself would be challenged at the I-526 stage. This kind of approval provides investors with the least overall risk of USCIS refusing the project part of their application.

Does That Mean Exemplar Plans Are Best?

Not necessarily. As a general rule, investors may prefer the security that comes from an exemplar plan being used, however, it is worth noting that the team behind the project, experience with EB-5 and the team that does due diligence on the project can provide significant added value in terms of mitigating the risk or ensuring that the deal in question is a good one. If an investor's application is not accepted at the I-526 stage due to project deficiencies, with a good team this only means that there may be some delay in processing the I-526.

It is also worth noting that proposed changes to the EB-5 program (not yet approved), would not allow for the marketing of projects to investors without approval of an exemplar business plan, which is a departure from current rules, which allow for marketing once a hypothetical plan is filed.

The best advice for investors is to look for a quality project first and to ensure that whoever is representing the project is experienced in EB-5 and has done a significant amount of due diligence. Given the sea of choices in EB-5 today, investors should consider the quality as the top priority and worry less about delays, which can be common regardless of the kind of business plan being used.

 

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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 Team, Chinese Investors, EB-5 Project, EB-5 investors, I-526, USCIS, EB-5, EB-5 Regional Center

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?

Many Flavors of Escrow for EB-5 Regional Centers (Updated)

Posted by Phil Cohen on Fri, Jun 19, 2015 @ 07:38 AM

As the EB-5 space continues to grow and mature, so do many aspects of putting aescrow eb5 regional center regional center together continue to change.

Escrow and EB-5

For a time, most all regional center deals involved an element of escrow for the investors.  In this case, escrow meant that the EB-5 investor commits to the investment in writing (subject to certain conditions, including approval of their I-526 petition) and while their I-526 was being reviewed, their investment sat in trust with an escrow company, who would release the funds to the project upon the investor's I-526 approval (or otherwise back to the investor, subject to certain conditions, if the approval was not attained).

Changes Afoot

Today, this is starting to change.  Some regional center deals forego escrow altogether, while others still might use escrow more creatively.  On the whole, we recommend to new regional centers to make use of escrow in the traditional sense as outlined above, at least while they establish their reputation and trustworthiness in the market.  The exception to this rule occurs where a regional center or project team can offer investors other reasons to develop a feeling of trust, such as a proven track record of the company and team that is behind the project. On the other hand, it is understood that waiting for I-526 approvals can take so long that it can threaten the viability of a project.

Different Approaches

EB-5 investors are often nervous, particularly around untested EB-5 entities, but if trust is established then some of the other options in escrow can be explored.  Among these options are the use of holdbacks, or the use of reasonable trigger mechanisms.

The holdback approach to escrow means that a certain amount of the funds among a pool of investors can be released to the project at a certain point.  For example, every time the regional center gets commitments from 10 investors it might release half of the funds it takes in to the project, holding back the other half to allow for failed I-526s or other allowable refunds.

The trigger mechanism approach could occur where a regional center, for example, releases escrow funds to a project upon the approval of one (or any reasonable number) of I-526 petitions for a given project, which would indicate that the project portion of the I-526 is being approved by USCIS and that denials, if any, would be due to a deficient investor application.  Others still, might offer to release escrowed funds the moment the I-526 is filed providing there is a legally-binding developer's guarantee in place.

Get Creative

Building trust should always be the first priority of a regional center in terms of how it positions itself to investors, largely conveyed via the EB-5 business plan.  With a good reputation a regional center's long term prospects can be very bright indeed.  As trust is built and earned among the investor community a regional center can start to look to other options in relation to its escrow structure and its deal structure generally, whereby investors might feel comfortable taking on certain risks which will ultimately enable a higher degree of both project and regional center stability.  Like any investor, EB-5 or not, the bottom line is that the more risk an investor has to take the more secure the investor needs to feel about the rest of your project or the companies behind it.

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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, regional center EB5, escrow, EB-5 investors, I-526, EB-5 Regional center processing times, EB-5, EB-5 Regional Center, EB5

Why an Increased Minimum Investment is Not Necessarily Bad for EB-5

Posted by Phil Cohen on Wed, May 20, 2015 @ 11:53 AM

As readers of this blog are likely aware by now, there is discussion takiEB 5 Investment Cost resized 600ng place which may result in the increasing of the minimum investment required for EB-5 investors from $500,000 to $750,000 (or possibly more) in a TEA (Target Employment Area) project.  As the EB-5 program continues to increase in popularity, the first concern among regional centers is whether or not this will reduce the size of the investor pool and therefore make raising capital more difficult in the program.

It is our opinion that this change would not severely affect the program for 3 main reasons:

  1. (China) EB-5 demand is likely to stay high: Some leading economists are suggesting China may be in for a difficult economic period in the coming years.  I will refrain from restating the analyses that lead to this conclusion, however, it is an important possibility.  In the event that this forecast comes to pass, it is suggested that many in China will perhaps have an increased sense of urgency with regard to developing the opportunity for US citizenship while they can.  Arguably tied to this point is the fact that many would also seek to make investments in other economies not facing similar difficulties.  Even in the event that this forecast does not turn out to be accurate, the implication would be a continued rise in Chinese prosperity thereby continuing to increase the number of individuals who would be capable of making an EB-5 investment.  Either way, in our opinion, we believe demand should remain high.

  2. Bigger impact of EB-5 marketing dollars:  EB-5 regional centers and/or project owners will have to recruit fewer investors in order to raise the same amount of money if the minimum is higher.  Less time spent overseas marketing projects and a quicker path to getting money in the door speaks for itself.

  3. Easier to meet job creation requirements:  With EB-5 regional centers and/or project owners able to raise more dollars per investor, the ultimate requirement for job creation will be reduced.  This means that regional centers will either have to create fewer jobs for the same amount of capital or in other cases they will be able to raise more capital for their projects because their project’s job creation capabilities will give them access to more capital from the same number of investors.

Ultimately, if this change comes to pass it is our opinion at Strategic Element that it will be a good thing for the EB-5 program and therefore a good thing for America.

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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 capital, Target Employment Area, EB-5 investors, EB-5, EB-5 Regional Center, job creation

Guest Expenditures in EB-5: A Double-edged Sword

Posted by Phil Cohen on Mon, Apr 27, 2015 @ 06:55 AM

On the February 26, 2014 stakeholder’s call EB-5 Investmentwith USCIS they clarified when indirect job creation could be attributed to guest expenditures.  This is good news primarily because guest expenditures were never allowed to be used before.  More specifically, USCIS stated that guest expenditures could be counted when a project:

  • is serving an unmet demand in its area
  • is providing a differentiated product (i.e. a
    product that is not otherwise available in the area) targeted to a specific
    market segment
  • is being developed in response to
    (and presumably to serve traffic resulting from) a new development in the community

On the surface, this appeared to be good news for the EB-5 community, as guest expenditures can have a significant impact on indirect job creation figures.

The Downside

There is a downside, however.  As many have documented in the case of tenant
occupancy, it often proved to be very difficult to know exactly how USCIS would interpret various attempts to meet the standards, given that they are not very specific.  With approval times as long as they are today, the unknown is whether or not USCIS would accept given justifications on a case-by-case basis. Since guest expenditures could arguably have an impact on job creation and therefore the amount of money that an EB-5 project could raise from EB-5 investors, this unknown could have an impact on the capital stack and project timing if there is a delay or considerable back-and-forth in dealing with USCIS.  

To the extent that a project can afford the time or can otherwise be flexible in terms of their capital stack, attempting to use guest expenditures can have a significant upside.  Most, however, would find that it would be very challenging to have to change an anticipated capital stack according to whether or not the use of guest expenditures would be allowed.

Over time, it is anticipated that more clarity will come both from USCIS in terms of policy memoranda and from the EB-5 community as we see what is accepted and what is not and the  reasons for those decisions.  In the meantime, however, many have seen significant pushback from USCIS when they have attempted to use guest expenditure.

Investors would also do well to try to recognize when guest expenditures are part of the plan, especially in a case where a hypothetical plan was submitted.  Until there is more clarity on what will be acceptable in the eyes of USCIS, guest expenditures can add some additional potential risk or delay in relation to the investor's approval at the I-526 stage.

 

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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, capital raise, EB-5 Regional Center Application Cost, EB5 capital, EB-5 investors, applications, USCIS, tenant occupancy, I-924, EB-5, EB-5 Regional Center, job creation

Knowing the Cost of an RFE to Your EB-5 Regional Center

Posted by Phil Cohen on Sun, Apr 05, 2015 @ 02:59 PM

Cost of RFE to EB5 Regional Centers resized 600What is an RFE?

An RFE is a request for further evidence.  RFEs are issued by USCIS when EB-5 regional center (or investor) applicants have not adequately presented sufficient information when applying to form an EB-5 regional center or an associated project, or if the information presented requires more clarity (the submission application is called the I-924).

Avoiding RFEs

The best way to avoid an RFE is to ensure that you have a good team in place and that you have had your I-924 package reviewed by qualified, experienced experts.  There can be no guarantees that an RFE can be avoided, since USCIS has made significant policy shifts without warning and in some cases, has appeared to issue RFEs that did not make sense to the applicant or their team of professionals.  However, this does not mean that one should not make every effort to avoid getting an RFE.  On the contrary, the rule of thumb that we follow is to present things at a higher level than necessary; more is better than less, as long as it is clearly documented and professionally presented so that an adjudicator will not miss it.

The Real Cost of an RFE

RFEs can be very costly, and can even sink a project.  Why? Depending on the actual substance of the RFE, an EB-5 regional center applicant may need to re-engage some of their team of experts, spend time addressing the RFE and preparing a response, which must then be submitted to USCIS for review. In some cases the RFE may even lead to a need for the applicant to shift an element of the business plan or strategy from what was originally intended, which can impact the project in unexpected ways.  In addition to the time it took to get the first application ready, submitted and reviewed (up to 12 months or more to get reviewed by USCIS alone, once submitted) an RFE could mean many more months of waiting, which can put certain kinds of projects at risk of failure.  The total cost will vary in each case, but in most cases it is safe to assume that an RFE could cost thousands of dollars and several months of additional waiting time.

If prospective EB-5 investors ask if you ever had an RFE and you are new to EB-5, not disclosing this would be untruthful and disclosing it can create the impression of wrongdoing to the investor even if this is not actually the case.  The long term effects of an RFE can mean lost opportunities with EB-5 investors.

Bear this in mind when choosing your EB-5 business plan writer,legal team and economist in particular.

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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

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Tags: EB-5 center I-924, EB-5 Regional Center Application Cost, EB5 Regional center, regional center EB5, regional center EB-5, EB-5 explained, EB-5 Regional center processing times, EB-5 Regional Center, EB5

(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

The Importance of a Buffer in EB-5 Job Creation

Posted by Phil Cohen on Mon, Feb 23, 2015 @ 06:17 AM

This a re-post of an earlier blog article, but because of its importance to investors, we felt it was worth mentioning it again.

When starting an EB-5 regional center or EB-5 project, many look to the regulations as the Start EB 5 Buffer resized 600guideline to what is required to have a successful EB-5 offering.  The guidelines, however, are only the beginning.  Starting an EB-5 project requires thinking that will not only get USCIS approval but which will also win over investors.  To this end, it is wise to consider the job creation component with the inclusion of a buffer of extra jobs.

Why Have a Buffer at All?

Creating a buffer of more jobs than are actually required by the program has the benefit of added security to investors, which in turn means added security for the project in terms of its ability to win investor interest in the first place and ultimately to maintain a reputation for successfully delivering job creation to investors, the core measure of success to all future investors.

Having a buffer of more jobs than are required by the program means that if things don't go to plan and not all the direct jobs that were originally planned can be created, investors will not lose the opportunity to have the conditions removed from their green cards at the I-829 stage.

Where indirect jobs are concerned, job creation counts will be dependent on fulfilling the inputs that the economist had used to develop the indirect job creation calculation.  Most business people will take a conservative approach to planning their businesses, which means guessing high on costs and guessing low on revenues.  If costs are over-estimated, however, and these costs were counted as the input of investment used by the economist in his or her calculation, this conservative approach can backfire.  While coming in under budget is certainly a respectable and desirable outcome in almost any business scenario, a lower investment input to the project can mean that the originally-calculated number of indirect jobs may have to be revised downward to match the revised input, thereby meaning less jobs to go around for EB-5 investors.

How Much is Enough?

A good rule of thumb for a job creation buffer is to plan to create 20% more jobs than needed, or a total of 12 jobs per investor.  This is not a hard and fast rule but certainly 15%-20% is  recommended for those newer to the space as a minimum in order to be competitive.  With proven experience and track record, more leeway can be taken in the fullness of time.  Bear this in mind when developing your EB-5 business plan and financial projections.

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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 capital, EB-5 Project, EB-5 explained, EB-5 investors, I-526, EB-5 Business plan, EB-5 Regional Center, job creation, What is EB-5?