Direct EB-5 Investment for Entrepreneurs and Small Businesses: Is it right for me?

While regional center investments make up the majority of all ongoing EB-5 investments, there are ample opportunities available for small businesses and entrepreneurs to use EB-5 capital to create a new enterprise or redevelop a distressed business.

The direct EB-5 investment is appealing for investors who want to launch their own business in the United States OR be involved in the management decisions of an enterprise. An EB-5 investor can invest in their own U.S. business, buy into a franchise model, or acquire a business that they will directly oversee or operate. The same program requirements apply: the minimum investment requirement is dictated by location, the business must create 10 new, full-time jobs. 

While not a preferred route for all investors, it can be ideal for investors who:

• Want to maintain control over the business and its operations, and by extension, personally ensure all immigration requirements are met
• Prefer to have access to total or higher shares of the business returns
• Is an entrepreneur with a new concept or business idea for the U.S. market
• Has an existing business overseas that could be expanded to the U.S. market
• Sees value in establishing credit and a track record in U.S. financial markets through direct engagement in business activity

Through the direct EB-5 investment model, businesses can raise capital from a single EB-5 investor to fund a business expansion and create 10 full-time jobs directly hired and employed by the business. Compared to traditional private equity, businesses may not cede as much stake in the enterprise through a direct EB-5 capital raise.

Is Direct EB-5 right for me?

To know whether the EB-5 program is a good fit for your development or business, review the below points to see whether you are in compliance with the necessary qualifications for a direct EB-5 investment.

Does your project fit the job creation requirements? If you are foreign national entrepreneur seeking to build a business in the U.S. and obtain an EB-5 green card, you must be able to create AND maintain 10 full time jobs for work-authorized individuals. This is difficult for businesses which usually have high turnover (like restaurants), or small businesses who will not directly employ many individuals. 

Will you be able to sustain this business for many years to come? EB-5 projects will need to be in operation for many years in order to accommodate the investor’s sustainment period and also facilitate repayment at the end of the loan period. 

Do you have past business experience in the field you want to area your commercial enterprise will operate in? Entrepreneurs with experience may be better qualified to undertake this effort and should be willing to accept the risk of losing the investment or visa if the business fails or does not create enough jobs per investor.

Will you be able to hire someone to run your business while you wait for your conditional green card? Generally, EB-5 investors will not be permitted to invest money into a business fund which they also control, as it violates the “at risk requirements” of the EB-5 visa. Unless you have nonimmigrant status in the US which allows you to work on your business (such as an E-2 or H-4 EAD), you must hire a third party to run your business. Can you work with people trustworthy enough to build a business with your hard earned money in a foreign country?

Are you able to hire the necessary professionals to help you create necessary immigration and financial reporting paperwork? Direct EB-5 investments constitute 2-5% of all EB-5 investments, and for good reason. The paper trail required for direct investments is often too complicated and extensive for most EB-5 investors to bear, especially when they must complete them as both the investor and business owner. 

If you answered yes to most of these questions, EB-5 may be a good fit for your direct development project. Although these guidelines outline some of the large scale difficulties direct offerings may encounter, speaking with experts in the field will be the best way to judge whether EB-5 is a good fit for you and your business.