Understanding the Intricacies of EB-5 Source of Funds Requirement

The EB-5 Immigrant Investor Visa, often viewed as a gateway to a new life in the United States, stands as a beacon of opportunity for foreign investors. However, the path to obtaining this visa is laden with challenges, the most notorious being the source of funds requirement. This crucial step demands meticulous attention and thorough documentation, serving as a litmus test for the legitimacy of an applicant’s financial resources.

The Complex Nature of the EB-5 Source of Funds Requirement

For every EB-5 applicant, the challenge extends far beyond the initial investment amount, whether it’s the standard one million and fifty thousand dollars or the reduced sum of eight hundred thousand dollars for projects in targeted employment areas. The requirement encompasses not just the investment, but also administrative costs and fees related to the investment, a facet introduced in 2022. Thus, the burden to prove the legal origins of the entire sum falls squarely on the applicant’s shoulders.

Navigating the Web of Documents: Legal Sources of Funds

The spectrum of acceptable sources of funds is diverse, ranging from gifted money and loan proceeds to earnings from overseas employment and the sale of assets. However, not all sources find favor with the authorities. Loans secured by the new commercial enterprise or its assets, are not likely to be accepted by USCIS.[M1]

To establish the legality of the source, the applicant embarks on an intricate paperwork journey. Take, for instance, funds originating from a foreign-owned business. Ownership must be proven through concrete evidence, such as foreign business registration records. But ownership alone is insufficient; the flow of funds from the business to the applicant must also be documented meticulously. This entails producing foreign business tax documents, transfer receipts, and bank statements that make clear the path funds took to reach the applicant.

Similarly, if the source is a property sale, an avalanche of documents must be amassed. The sales contract, deed, transfer receipts, and bank statements must be presented in harmony to validate the transaction’s legitimacy. Moreover, tax records showcasing payments made on the sale proceeds add another layer of authenticity to the applicant’s claims.

In situations where you acquired funds through a personal loan, you need a comprehensive set of documents. These include a detailed investor’s capital source statement explaining the loan’s terms, a written loan agreement specifying interest rates and repayment periods, and bank statements illustrating the receipt of loan proceeds.

When dealing with an individual lender, provide evidence demonstrating their funds’ lawful origin. This might involve the lender’s capital source statement, their individual income tax returns for the past five years, or other documents indicating the legality of their income.

Remember, the completeness and authenticity of your documentation are key. Providing a thorough, well-organized set of documents enhances your chances of meeting the stringent EB-5 requirements.

The Challenge of Time: How Far Back Can We Go?

One of the most daunting aspects of this process is the government’s ability to dig into an applicant’s financial history. While there is no specified time limit, USCIS can demand documents dating back several decades. Despite this daunting prospect, there are limitations. Regulations prescribe a seven-year limit on tax returns and a 15-year limit on administrative, civil, or criminal actions. Additionally, the burden of proof lies not in absolute certainty but in convincing the adjudicating officer that the claims are probably true. Thus, a well-constructed narrative, supported by compelling evidence, can tip the scales in the applicant’s favor.

Creative Solutions Amidst Document Shortages

Yet, what happens when crucial documents are elusive, lost to the ravages of time? In such cases, a creative approach becomes paramount. Secondary evidence, such as articles or listings in local newspapers, can offer a lifeline. These snippets of the past, while indirect, serve as corroborative evidence. Affidavits, sworn statements from individuals with firsthand knowledge, also bridge the evidentiary gap, validating the applicant’s claims when primary documents are unavailable.

Navigating Challenges: Proof of Persistence

Sometimes, acquiring essential documents like affidavits from banks or lawyers can be an uphill battle. In these instances, USCIS acknowledges the difficulty and may accept evidence demonstrating the unavailability of these documents. For example, obtaining a statement from the bank explaining the non-existence of requested documents, due to retention policies mandating destruction after a certain period, can suffice. Alternatively, submitting evidence of persistent efforts to acquire the necessary paperwork, such as detailed records of communications with relevant parties, showcases the applicant’s diligence in meeting USCIS requirements.

Conclusion: A Journey of Diligence, Creativity, and Professional Guidance

In the realm of EB-5 visas, the source of funds requirement indeed poses significant hurdles. However, armed with diligence, attention to detail, and a touch of creativity, applicants can surmount these obstacles. It’s crucial for investors to be knowledgeable about the process, understanding that everyone’s case is different, and beginning preparations ahead of time. Working closely with experienced immigration attorneys and financial advisors is paramount; their expertise can illuminate the path, ensuring that all documents are in order and requirements are met. With their guidance, applicants can navigate the complexities of the EB-5 source of funds requirement, greatly enhancing the likelihood of a successful outcome and paving the way for a new life in the United States.

Here is a list of resources that can help readers research the EB-5 source of funds requirement:

USCIS website: The USCIS website is the primary source of information on the EB-5 visa program, including the source of funds requirement. The website provides detailed guidance on acceptable sources of funds, documentation requirements, and the adjudication process.

USCIS Policy Manual: The USCIS Policy Manual provides more in-depth information on the EB-5 visa program, including the source of funds requirement. The Policy Manual is a valuable resource for immigration attorneys and other professionals who work with EB-5 investors.

Invest in the USA: (IIUSA): The IIUSA is a non-profit trade association that represents the interests of EB-5 regional centers. The IIUSA website provides a wealth of information on the EB-5 visa program, including the source of funds requirement.

American Immigration Lawyers Association (AILA): AILA is a bar association for immigration lawyers. The AILA website provides a variety of resources on the EB-5 visa program, including the source of funds requirement.

Immigration and Nationality Act (INA) Handbook: The Immigration and Nationality Act is a comprehensive resource on U.S. immigration law. The Handbook includes a chapter on the EB-5 visa program, including the source of funds requirement.

Introduction:

Investing in EB-5 projects can be a complex endeavor, requiring a deep understanding of the capital stack, the various components that make up the financing structure and the financial risks they present. In this blog post, we will explore the key elements that investors in EB-5 need to evaluate when assessing a real estate development project. Drawing from expert insights, we will demystify the capital stack, its significance, and the critical factors investors should consider.

The Foundation: The Developer’s Motivation

At the heart of every development project lies a motivated developer seeking to bring their vision to life. Strategically, developers either aim to sell a completed asset or manage the asset long-term. Whichever strategy they choose will usually influence the way they build their capital stack. In short, a developer’s financing strategy for long-term or short-term asset holds should align with the property’s cash flow potential, market conditions, property type, and risk management strategies.

The developer typically contributes 5% – 30%, or higher, of their own capital to fund projects. It is important that the developer invest this capital as the “last money out”, so lenders, EB-5 investors and other investors can gain comfort that the developer is putting substantial capital at risk and understands that almost everyone else will be repaid before they are, which further motivates the developer to complete the project on time and within budget. Developer equity typically funds purchased land, pre-development costs, development of construction documents, zoning, land entitlements, demolition, and/or civil site work, and could also include a portion of the soft and hard costs of construction and working capital to commence operations once the facility is constructed.

The Senior Loan: Primary Component of the Capital Stack

One crucial element of the capital stack is the senior loan, typically the largest portion of the financing. In the United States, most projects secure a mortgage loan, with lenders seeking security through a first position lien on the property. This allows them to foreclose on the property if the loan is not repaid, giving them the ability to sell or redevelop the project if they choose.

Construction and Permanent Loans: Regional banks and Institutional Lenders typically provide construction loans, limiting the loan-to-value ratio (LTV) to 60-65% of the capital stack. In certain cases, this ratio may be pushed to 70%, although the ratio has been decreasing as the real estate market tightens and interest rates have risen. It is important to note that LTV ratios can vary depending on the lender, the borrower’s creditworthiness, asset type and the size of the loan. Construction loans usually have a floating interest rate, currently around 300-500 basis points (bps) over the Secured Overnight Financing Rate (SOFR). This means that a borrower would pay an interest of 8.3% – 10.3% on a construction loan, assuming a SOFR rate of 5.3% in today’s market. The mortgage amount is based on the project’s net operating income.

In commercial real estate, both construction loans and permanent loans play crucial roles at different stages of a development project. Here are the differences between them:

Construction Loan

Use: Construction loans are short-term loans used to finance the cost of constructing a new building. These funds can be used for labor, materials, and other related costs involved in the construction process.

• Term: These loans typically last for the duration of the construction period, which usually ranges between 6 months to 2 years, depending on the project’s complexity.
• Interest Rate and Payment: Construction loans often have variable interest rates. Interest is usually paid only on the drawn amount and not the total loan commitment. The principal is typically repaid at the end of the construction period.
• Loan-to-Value (LTV): Lenders for construction loans generally offer lower LTVs due to the higher risk associated with construction projects. It’s common for lenders to offer a loan covering 60% to 70% of the project’s appraised value.
• Draws: The loan proceeds are often disbursed in stages, or “draws,” as the construction progresses and after certain milestones are met.
• Risk: These loans carry significant risk, as they rely on the completion of a project that does not yet exist. Delays or cost overruns can greatly affect the feasibility of the project.

Permanent Loan

Use: Permanent loans, also known as long-term or take-out loans, are used to repay the short-term construction loan and provide longer-term financing once the building is complete and producing income. These funds can be used to pay off construction debt, refinance existing debt, or purchase a completed building.

• Term: These loans usually have a term of 5 to 20 years, or even longer.
• Interest Rate and Payment: Permanent loans often have a fixed interest rate. Both the principal and interest are typically repaid over the loan term in a series of regular payments.
• Loan-to-Value (LTV): Lenders for permanent loans usually offer higher LTVs than construction loans, typically around 70% to 80% of the property’s appraised value.
• Amortization: Permanent loans usually involve an amortization schedule, which is a detailed outline of how the loan’s principal and interest will be repaid over time.
• Risk: These loans carry lower risk than construction loans, as they are issued for a completed project that is usually already generating income.

In conclusion, construction and permanent loans serve different purposes in a commercial real estate project’s lifecycle. A construction loan is used to fund the building phase, while a permanent loan provides longer-term financing after the project is completed.

Government Assistance: Offsets, Tax Incentives, and Grants

Developers can leverage government assistance in the form of tax incentives or grants to reduce their equity requirement. These initiatives contribute to the project’s brand and net operating income by reducing costs. State and city grants, as well as low-interest loans, can provide substantial commitments, significantly reducing the developer’s equity contribution.

While the specifics of government incentives and assistance available to commercial real estate developers can vary over time and between jurisdictions, there are several key types of incentives typically offered by local, state, and federal governments across the United States. Here’s a broad outline:

• Tax Incentives: These are often the most substantial form of government assistance. They can come in various forms, such as property tax abatements, sales tax exemptions, or income tax credits. Examples include the Low-Income Housing Tax Credit (LIHTC) or Historic Preservation Tax Credits at the federal level.
• Tax Increment Financing (TIF): This is a public financing method used for redevelopment and community improvement projects. The future tax revenues of the improved property are used to finance the present cost of the project. The logic is that the improvements will lead to increased property values, hence higher tax revenues, which are then used to repay the costs of the project.
• Grants and Loans: Some government agencies offer grants and low-interest or forgivable loans to encourage development in certain areas or for certain types of projects. For example, the U.S. Department of Housing and Urban Development (HUD) offers various grants and loan programs.
• Land Use Incentives: These include things like zoning variances or fast-tracked permitting to encourage specific types of development. In some cases, higher density or additional building height may be allowed in exchange for the developer providing public amenities or affordable housing units.
• Public-Private Partnerships (PPP): In these arrangements, a government entity collaborates with a private developer to carry out a real estate project. The government may contribute land, financing, or other resources, while the developer takes on the task of construction and management.
• Opportunity Zones: Established by the Tax Cuts and Jobs Act of 2017, this program offers tax incentives for investments in designated economically distressed communities. Developers can defer tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until the investment in the QOF is sold or exchanged or until December 31, 2026.
• New Market Tax Credits: This federal program provides tax credit incentives to investors for equity investments in certified Community Development Entities, which invest in low-income communities.
• EB-5 Investor Program: This is a federal program that allows individual investors (and their spouses and unmarried children under 21) to apply for a green card (permanent residence) if they make an investment in a commercial enterprise in the United States that plans to create or preserve 10 permanent full-time jobs for qualified U.S. workers.

Please note that these are general descriptions, and the specifics can vary widely. Some programs have complex requirements or restrictions, and the benefits can be contingent on meeting certain goals or criteria.

EB-5 Investment: Filling the Capital Gap

The developer equity, senior debt and government incentives can fill up to 70% – 90% of the capital stack on average. EB-5 capital can play a pivotal role in filling the remaining capital gap, once all the government incentives have been identified and the level of developer’s equity is considered. EB-5 capital typically offers a lower cost of capital compared to private market options and serves a similar purpose as a mezzanine loan. EB-5 investments typically average around 10% – 30% of the overall capital stack and is often aligned with the developer’s equity stake in well-structured deals.

Understanding the EB-5 Capital Stack Order and Risks

The capital stack, from top to bottom, includes the senior loan, mezzanine loan, government grants or agency loans, preferred equity, and equity. In theory, EB-5 capital can be everything from the senior lender down to the equity position, however it often sits just above the equity position in most projects. Mezzanine lenders, while costly, may be sought if other capital sources are not available. However, they pose risks to both the developer and the EB-5 investor. If the project fails, the mezzanine lender can foreclose, potentially wiping out all investments. EB-5 investors have limited recourse and their priority depends on the surplus, if any, from the foreclosure sale.

The capital stack in a commercial real estate development project refers to the legal organization of all capital placed into a project, including both debt and equity. From least risky to most risky, the order typically goes as follows:

1. Senior Debt: This is typically the largest portion of the capital stack and is usually provided by a bank. It is the least risky because it has the first claim on the property and its cash flow. The lender has the right to foreclose on the property if the borrower defaults on the loan. Because of its lower risk, it also has the lowest return, usually in the form of a fixed or floating interest rate.
2. Mezzanine Debt: This is a hybrid form of debt and equity financing that gives the lender the right to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. It is subordinate to senior debt but superior to equity. The returns are generally higher than senior debt to compensate for the higher risk.
3. Preferred Equity: This layer of the capital stack has a higher risk than debt but is less risky than common equity. Preferred equity investors have a claim to the property’s profits after the debt service has been paid but before the common equity holders. In the event of a default, preferred equity holders have a higher priority than common equity holders but less than debt holders. They get a specified, fixed rate of return, which is usually higher than debt to compensate for the risk.
4. Common Equity/ Joint Venture Equity: The riskiest part of the capital stack is the common equity, also known as the owner’s, or developer’s, equity. It includes the money invested by the property’s owners or developers and their partners. Common equity holders are the last to be paid in the event of a default or bankruptcy, so they assume the most risk. However, they also stand to gain the most if the project is successful, as there is no cap on their potential returns like there is for lenders and preferred equity investors.

In terms of risk, senior debt is the least risky, followed by mezzanine debt, preferred equity, and then common equity. The riskier the layer, the higher the expected return to compensate for the increased risk. The exact structure of a capital stack can vary depending on the specifics of the project, the developer’s relationship with their lenders and investors, and the overall risk and potential return of the project.

Government grants and loans can take on different positions within the capital stack depending on their specific terms.

Government Grants: Grants are often non-dilutive, meaning they do not take ownership stakes and do not need to be repaid. As such, they do not typically have a direct place in the capital stack as they do not create a liability, nor do they require a return or dilute ownership. They effectively reduce the capital needed for the project and therefore could indirectly reduce the amount of equity or debt needed.

Government Loans: The position of government loans within the capital stack can vary greatly depending on the terms of the loan. Some loans may take a senior position, others may be subordinate to certain forms of private debt, and some may operate more like mezzanine financing.

• Senior Position: If a government loan has been structured to be repaid before other forms of debt, it would take a senior position in the capital stack. These loans typically have lower interest rates than other types of debt and can be an attractive form of financing for developers.
• Subordinate Position: If a government loan has been structured to be repaid after other forms of debt, it would be in a subordinate position, similar to mezzanine debt. These loans might have higher interest rates than senior debt but could offer more flexible repayment terms.
• Mezzanine-Like Position: Some government loans may have flexible repayment terms and conditions that resemble mezzanine financing. For example, some government loans may be converted into grants if certain conditions are met.

Government financing can also sometimes come with conditions or restrictions, such as the need to create a certain number of jobs, use certain types of construction materials or techniques, or maintain affordability for a certain number of years. As such, while they can provide valuable capital for a project, they can also introduce additional considerations and complexity into the project’s financing structure.

Real Estate Expertise and Due Diligence

Investors in EB-5 projects should have a solid understanding of real estate dynamics and the intricacies of a project’s structuring. While the owners and management teams of some EB-5 regional centers possess backgrounds and a strong track record as alternative lenders, many do not. It is crucial for regional centers to act as a seasoned alternative lender and engage in the structuring process accordingly to protect investors and secure favorable deals.

Conclusion:

Evaluating the capital stack in an EB-5 development project is a crucial step for investors. Understanding the components, their order, and the associated risks is essential for making informed investment decisions. By comprehensively assessing the financing structure and leveraging real estate expertise, EB-5 investors can mitigate risks and maximize their potential returns.

Fill out the webform below to set up a no-obligation consultation with our experienced investment professionals. Let us help you take advantage of the EB-5 program, leveraging our industry expertise and insights.

Current issue:

We have seen waves of massive layoffs across the tech industry over the past two years. According to Layoffs.fyi, a website that tracks layoffs in the tech industry, there have been over 154,000 layoffs in 2023 and over 264,000 since 2022. Big names like Google, Meta, and Amazon are at the top of that list.

The situation is particularly unsettling for H-1B workers. The snowball effect of a layoff can be incredibly stressful for H-1B visa holders. Not only do they face a loss of salary, but also the ability to stay in the country.

Introduction:

Many of the H-1B visa holders we work with at InvestAmerica express very similar frustrations regarding their status, including:

Uncertainty and Insecurity: H-1B holders often face uncertainty and insecurity regarding their immigration status. They may feel stuck in their jobs or restricted in their ability to travel or work in different locations within the US. This lack of mobility can limit career opportunities and personal growth.

Dependence on Employers: H-1B holders are tied to their employers, as their visa status is employer-sponsored. This dependency can make it challenging to switch jobs or negotiate better working conditions.

Visa Renewal and Extensions: H-1B holders need to go through the visa renewal or extension process periodically, which can be time-consuming, stressful, and subject to changing immigration policies. Any delays or issues in the process can lead to legal uncertainties.

What happens once an H-1B termination takes place?

Layoffs are devastating and disruptive for anyone, but for immigrants, it adds a whole layer of distress and complexity. Once a layoff takes place, the employer is obligated to notify USCIS immediately that the position has been terminated, automatically revoking the H-1B. The revocation of the H-1B employment is automatic, and a 60-day grace period begins.

The fundamental issue to keep in mind is that once the termination occurs, the clock starts ticking. H1-B workers have a 60-day grace period in which they are still considered in status. Essentially, you have 60 days to find a new job or until the expiration of your I-94, whichever is shorter. There are always differences depending on your personal situation specific to other pending status adjustments that may be process. We recommend you consult with a licensed immigration legal professional to understand the key differences.

However, there’s a distinction between being out of status and having unlawful presence. If you accrue more than 180 days of unlawful presence, after the 60 day grace period, you will be barred from re-entering the country. During this time, it’s crucial to get things in order and potentially exit the country. If your I-94 expires, you will likely have to leave the country sooner. Exceeding these grace periods could result in a three-year ban. If you exceed one year of unlawful presence, you will be barred from re-entry for 10-years.

During this period, you need to find a new solution. This could involve finding a new employer to sponsor you. If your spouse is on H-1B, you could consider moving to H4 status as a dependent. You might also consider another visa to change status and stay in the United States. Many individuals on H-1B visas consider transitioning to a green card through the EB2 or EB3 category. However, if you examine the Visa bulletin for countries like China and India, you’ll find significant backlogs in these categories that may prove untenable.

Exploring EB-5 as an alternative has proven to be an excellent solution for the qualified investor. The EB-5 program, established in the 1990s, provides a solution by offering a pathway to permanent residency through investment. In this blog post, we will explore the EB-5 process, the significance of working with reputable investment advisors and immigration attorneys, market viability and potential returns for investors, as well as post-EB-5 life and suitable investment options.

1. The Basic Steps to transfer to an EB-5 visa for H-1B holders:

The EB-5 investment process consists of three main steps. Firstly, investors identify a suitable investment and file the Immigrant Petition (I-526E), which includes a business plan outlining the investment project and the expected job creation. The second step is the adjustment of status (I-485), where investors can change their status from an existing visa to a green card application while remaining in the United States. Previously, these two steps were taken separately, but recent changes allow concurrent filing, providing more flexibility for investors. The benefit of this approach is that you will be granted all rights associated with an Employment Authorization Document (EAD), including full travel benefits. Additionally, your children will be protected from aging out of the program due to any extended processing times. Finally, after two years of holding a conditional green card, investors must demonstrate that the investment has been maintained and has created the required jobs to obtain a permanent green card.

2. Qualifying for an EB-5 investment

To qualify as an EB-5 investor, you must meet the following requirements:

● You must be a foreign citizen and non-U.S. resident.

● You must qualify as an accredited investor.

● You must invest at least $800,000 (or $1.05 million if you are not investing in a targeted employment area) in a new commercial enterprise that will create or preserve at least 10 full-time jobs for U.S. workers.

● You must be able to demonstrate that your investment funds are legally obtained.

● You must be able to pass a background check.

3. The Importance of Reputable and Licensed Advisors:

The success of the EB-5 process greatly relies on working with reputable, experienced and licensed professionals like immigration attorneys and investment advisors. Look for professionals with a long and successful track record, have a proven history of guiding investors through all steps of the EB-5 program, looking out for their best interests and achieving a 100% approval rate for permanent green cards. They are trained to provide valuable guidance, provide diversified and well-vetted investment options, and ensure compliance with the complex requirements and regulations of the program and U.S. securities laws. Partnering with trusted professionals minimizes risks and increases the likelihood of a successful EB-5 journey.

4. Market Viability and Potential Returns for Investors:

Investors exploring the EB-5 program often face challenges in gaining a comprehensive view of the investment landscape. Historically, access to investment deals has been predominantly controlled by project sponsors, such as regional centers or developers. These sponsors typically lack the incentive or obligation to introduce investors to projects outside their purview. This limited exposure makes it difficult for investors to compare funds, assess the merits of underlying projects, and weigh all pertinent factors crucial to their decision-making process.

When considering the EB-5 program, it’s imperative for investors to meticulously evaluate the market viability of the investment project, along with a myriad of other considerations. Conducting thorough professional due diligence on the project’s fundamentals is essential, both from an immigration and financial standpoint. Only an independent registered broker-dealer, free from any conflicts of interest, is equipped to market a diverse array of investment options. Such a broker can also offer independent advice to investors regarding the benefits of cash flows and returns projected to be generated by the project.

5. Post-EB-5 Life and the Importance of Suitable Investment Options:

Once investors obtain their permanent green cards, they face the question of what to do with their capital and how to continue their investment journey in the US. It is important that investors approach post-EB-5 life cautiously and consider investment options that align with their risk tolerance and financial goals. If they began their journey with a reputable investment advisor, they could offer suitable choices for investors seeking to diversify their portfolio. Such firms will have a portfolio of alternative investment options that are aimed at providing optimal diversification. Investors should also evaluate the tax implications of their investments, especially how obtaining permanent US residency might affect their overall tax situation. It’s advisable to consult with tax professionals who are well-versed in both the US tax code and the tax regulations of their home country.

Ready to take the next step? Our team at InvestAmerica is committed to guiding you on the path to a prosperous future. By understanding your unique immigration and financial goals, we can tailor a strategy that fits your needs.

Fill out the webform below to set up a no-obligation consultation with our experienced investment professionals. Let us help you take advantage of the EB-5 program, leveraging our industry expertise and insights.

Embarking on the EB-5 Visa investment journey involves meticulous planning and expertise at every step. This comprehensive, multi-stage process aims to facilitate immigration and ensure capital preservation. To navigate its complexities, it’s crucial to engage licensed professionals and independent investment advice.

Navigating the EB-5 Visa Process

The EB-5 Visa process is differentiated based on the applicant’s location—inside or outside the United States. But no matter the location, the initial steps remain the same—documenting the source of funds to satisfy USCIS requirements. This stage entails demonstrating that the invested capital is earned legally, underlining the necessity of a licensed professional like an immigration attorney for the review and filing of this documentation.

The second fundamental step in navigating the EB-5 process is choosing the right project. At this stage, an investor can greatly benefit from the insights of a licensed broker dealer or an independent investment professional. This financial expert can provide essential guidance to evaluate all the factors, including not just the benefits but also key relevant risks, that should be considered.

Numerous investment options exist, from real estate, a popular choice, to a variety of other operating businesses. Each fund, whether it’s a multifamily development, a hotel, a retail space, an office building, or an industrial complex, has distinct characteristics and potential challenges that need to be thoroughly understood.

A comprehensive understanding of market dynamics is a pivotal part of the selection process. A data-driven approach aids in shedding light on market trends, the economic landscape, and a fund’s future potential. With the aid of a broker dealer, these complex dynamics can be deciphered, assisting in an informed decision-making process.

Furthermore, investors must also factor in project sponsors during the selection process. Evaluating sponsors based on their prior experience, knowledge of the asset class, and track record is essential. Insight into other participants in the deal outside of the EB-5, such as anchor investors, can be helpful in assessing the reputation and reliability of the sponsors.

The next question to address pertains to the type of investment. Both debt and equity options carry distinctive risks and rewards, the understanding of which is integral to making an informed investment decision.

Deal structure also plays a significant role, covering elements such as position of EB-5 funding in the capital structure of a deal, intercreditor agreements, investor rights, the senior lender, rate of return, distributions, and possible conflicts of interest. A broker dealer, with a regulatory mandate to protect the investor interests, can help navigate these intricate factors, assess associated risks, and provide proper guidance.

Finally, a crucial part of understanding the EB-5 process lies in knowing the roles of fund administrators, auditors, and escrow agents. Each entity plays a vital role in performing safety checks on a project. With the assistance of a broker dealer, the structure, services, and solutions offered by these entities can be understood better, enhancing the investor’s comprehension and decision-making abilities.

Once the project selection is finalized, investors must file an I-526E petition with USCIS to determine their eligibility for the program. This step, followed by the investment, is where USCIS verifies if the investment complies with the immigration law requirements and whether the funds were legally earned.

Subsequent stages include consulate interviews or filing for adjustment of status and work authorization, depending on the investor’s location. At each of these steps, the applications are reviewed thoroughly, and interviews may be conducted to determine the applicant’s admissibility.

Following the issuance of a conditional green card, an application for the removal of conditions is filed, typically between 21 to 24 months later. This process ensures that the invested funds have been correctly deployed and have contributed to creating at least ten American jobs. On successful completion of these conditions, an unconditional green card is granted.

Ultimately, the final stages of the EB-5 investment process pivots towards safeguarding capital and ensuring the return on investment. Achieving this necessitates two milestones: successfully removing conditions from your green card and the termination of the set investment term, which is typically no less than five years. This critical phase hinges on several key factors including a clear comprehension of the exit strategy, a profound understanding of prevailing market conditions, a thorough analysis of comparables, and a solid grasp of the asset class in which the investment lies. It’s at this juncture where independent investment advice and astute guidance becomes invaluable, helping the investor make informed decisions and successfully navigate this complex process.

The Vital Role of Licensed Professionals and Independent Broker Dealers

Licensed professionals, especially immigration attorneys, play an indispensable role in the EB-5 process. Their expertise is focused on correctly handling all documentation and paperwork in accordance with USCIS criteria.

Similarly, independent broker dealers, such as InvestAmerica, registered with the SEC and members of FINRA, bring invaluable expertise to the EB-5 process. They conduct due diligence, review marketing materials, focus on regulatory compliance, and undertake suitability reviews to protect the investor’s interests.

Furthermore, broker dealers provide a wide array of EB-5 investment options that cater to the unique needs of each investor. They also review compliance with U.S. securities laws, providing an additional layer of protection for EB-5 investors. By offering an unbiased and objective review of investment options, they strive to align the chosen investment with the investor’s goals and compliance with U.S. securities laws.

Conclusion

The EB-5 journey is detailed and requires the expertise of licensed professionals and independent broker dealers. From the documentation of funds, application for a green card, to the return of the invested capital, each stage calls for specific knowledge and proficiency. By collaborating with these professionals, investors can ensure a smoother navigation through the EB-5 Visa process, fulfilling all compliance requirements, and making the complex procedure manageable. This journey, when guided correctly, can be a rewarding one, paving the way to immigration and financial growth.

Ready to take the next step? Our team at InvestAmerica is committed to guiding you on the path to a prosperous future. By understanding your unique immigration and financial goals, we can tailor a strategy that fits your needs.

Fill out the webform below to set up a no-obligation consultation with our experienced investment professionals. Let us help you take advantage of the EB-5 program, leveraging our industry expertise and insights.

Visa set asides have emerged as a significant development in the EB-5 investor visa program, offering new opportunities for investors and changing the landscape of immigration strategies. This article aims to shed light on this complex topic, providing a comprehensive understanding of visa set asides and their implications for EB-5 investors.

What are Visa Set Asides?

Visa set asides are a new legislative provision that reserves a portion of the annual EB-5 visa limit for specific categories, namely rural areas, high unemployment areas, and infrastructure projects. These reserved categories account for 32% of the overall employment fifth preference annual limit, while the remaining 68% goes to the unreserved categories.

The EB-5 visa set aside categories offer different investment options for individuals seeking to obtain a visa through this program. The first category is for Rural Targeted Employment Area (TEA) projects, which are situated in places with a small population of fewer than 20,000 people or low population density of less than 50 people per square mile. The second category is for High-Unemployment TEA projects, located in areas with an unemployment rate that is at least 150% of the national average. Lastly, there are Public Infrastructure projects, focused on constructing, renovating, or expanding public infrastructure like roads, bridges, airports, and water treatment plants. To invest in these projects, the minimum requirement is $800,000. These set aside categories allow investors to choose the project that suits their preferences and eligibility criteria for obtaining the EB-5 visa.

Impact on EB-5 Investors

The introduction of visa set asides has significantly altered the EB-5 landscape. Investors now have multiple avenues to consider when filing their petitions. They can qualify for more than one category and file in multiple categories to maximize their chances of obtaining a visa in a timely manner.

For instance, the rural area category, which currently receives 20% of the overall limit, is considered by many to offer the best opportunity. However, the specifics of priority processing for rural investments are yet to be defined by USCIS.

The Visa Bulletin and Final Action Dates

The term “final action dates” is used in the context of the Visa Bulletin, which is a document issued by the U.S. Department of State that provides information about the availability of immigrant visas.

Final action dates are imposed when the demand for visas exceeds the annual limit. These dates are used to determine when a visa applicant can expect to receive their visa. If an applicant’s priority date (the date their visa application was filed) is before the final action date listed in the Visa Bulletin, their visa application can proceed. If their priority date is on or after the final action date, their visa application cannot proceed until the final action date moves beyond their priority date.

The final action dates are projected to remain current throughout fiscal year 2023 and most likely well into the second half of fiscal year 2024 for the new visa set aside categories. However, it’s crucial to note that just because the Visa Bulletin is current today, it doesn’t guarantee there won’t be a visa backlog in the future. The Visa Bulletin can change to reflect increased demand that isn’t accounted for in the current bulletin.

Carryover of Unused Visas

The carryover of unused visas from one fiscal year to the next is a crucial aspect of the visa set asides. The unused numbers from the previous fiscal year are carried over to the current fiscal year, and they must be used within that year. This carryover of unused visas is unique and provides these categories with potentially more numbers, making it less likely that final action dates will be imposed due to the increased supply of visas.

The impact of these provisions on the EB-5 program is still being debated. Some experts believe that the new laws will help to reduce the backlog of unused visas and to make it more likely that EB-5 investors will be able to obtain a visa. Others are more skeptical, arguing that the new laws will not have a significant impact on the issue of unused visas.

It is likely that the impact of the new laws on the EB-5 program will not be fully known for several years. However, the new laws represent a significant step towards addressing the issue of unused visas and making the EB-5 program more efficient and effective.

The Future of Visa Set Asides

While the introduction of visa set asides is a positive development for investors, it’s important to note that the noted “current” status of the Visa Bulletin does not guarantee there won’t be a visa backlog in the future. The Visa Bulletin can change to reflect increased demand that isn’t accounted for in the current bulletin.

However, based on current information and historical processing times, many industry experts believe it’s unlikely that final action dates will be imposed before the second half of fiscal year 2024, and possibly not until the end of that year. This provides a window of opportunity for investors to take advantage of the new visa set asides.

Opportunity for Adjustment of Status

Currently, the visa set aside categories are shown as “current” because the Department of State hasn’t received any indication of i-526 approvals for those categories from USCIS. This creates a window of opportunity for investors to file for adjustment of status concurrently with their i-526 petitions. By filing early, investors can secure an EAD card and advance parole, allowing them to remain in the U.S., travel and obtain a work permit, even if their H1B or F1 status expires. Once the bulletin lists these set aside categories as oversubscribed then the opportunity to file concurrently will no longer carry the same benefits.

In conclusion, visa set asides represent a significant shift in the EB-5 program, providing new opportunities for investors and potentially easing visa backlogs. However, as with any immigration process, it’s essential for investors to stay informed and closely follow updates to navigate this new landscape effectively.

Have you ever considered pursuing the American dream, perhaps to benefit your children’s educational and career opportunities, or to mitigate political risk, yet found yourself unsure about how to make it a reality? The EB-5 Immigrant Investor Program may be the opportunity you’ve been searching for. This U.S. government-sponsored initiative enables foreign investors to gain permanent residency and potentially citizenship in the United States through investing in qualified U.S. businesses.

A Brief Overview of the EB-5 Program

Introduced in 1990, the EB-5 program, which stands for Employment-Based Fifth Category Program, provides a pathway to U.S. residency for foreign nationals who invest in a qualified U.S. business. The program has significantly contributed to the U.S. economy, particularly aiding recovery during the financial crisis of 2008 and 2009 by creating millions of U.S. jobs.

The requirements for participation in the EB-5 program are straightforward. Each foreign investor is required to create more than ten U.S. jobs through their investment. Once this condition is met, they are eligible to obtain a U.S. green card, offering them the many benefits of living in the United States, including access to world-class education, healthcare, and a high quality of life.

Updates to the EB-5 Program

However, like any dynamic initiative, the EB-5 program has undergone changes over the years. In June 2021, the program was temporarily shut down as it did not pass a unanimous consent vote in the U.S. Senate. Following a period of uncertainty and tireless efforts by representatives of organizations such as IIUSA, of which InvestAmerica is a member, the program was reinstated on March 15, 2022, when President Biden signed into law the EB-5 Reform and Integrity Act. This act introduced several crucial modifications to the program:

1. The EB-5 program received an extension through September 30, 2027, ensuring more than five years of uninterrupted operation.

2. The minimum investment amount in a targeted employment area (TEA) rose from $500,000 to $800,000, while in a non-targeted employment area, the minimum investment rose from $1 million to $1.05 million.

3. The grandfathering clause was introduced, ensuring all investor petitions filed before September 30, 2026, must be fully adjudicated by USCIS, regardless of any future lapse in the EB-5 program.

4. New set-aside visas were added to the program, allocating 20% of all the EB-5 visas for rural projects, 10% for targeted employment area urban distress projects, and 2% for infrastructure projects. This helps investors bypass potential backlogs in visa applications.

5. Rural projects now receive priority processing, meaning applications for such projects are projected to be processed faster.

Why Choose InvestAmerica?

InvestAmerica has successfully navigated the EB-5 program, raising hundreds of millions of dollars across a wide range of investments and helping hundreds of investors secure green cards for themselves and their families. We prioritize aligning our financial interests with those of our investors, acting as a financial advisor and striving for a conflict-free process.

We prioritize security for our investors by focusing on fully funded capital structures with well-capitalized and experienced developers. Our investment philosophy also includes focusing on projects already under construction and creating jobs.

In conclusion, the EB-5 program, especially with its recent modifications, offers a unique opportunity for foreign investors seeking residency in the United States. With the right guidance and assistance, living the American dream could be within your reach.