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 guideline 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.
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).