I am the Managing Partner of EB5 Affiliate Network – a national EB-5 visa firm with 1,800+ foreign investors from 60+ countries.
The EB-5 Immigrant Investor Program has provided business leaders and project developers in the U.S. with a source of capital for more than 30 years. It has strengthened the U.S. economy by driving foreign direct investment, which is often available to projects at below-market rates.
As the founder and managing partner of an EB-5 firm, I have helped numerous business leaders structure their EB-5 projects and gain access to EB-5 investment capital. Although the EB-5 program offers an opportunity to secure financing at below-market rates, business leaders should keep in mind that sourcing EB-5 capital is a complex process that requires the involvement of many professionals across various disciplines. Additionally, the United States Citizenship and Immigration Services (USCIS) sets out numerous requirements for EB-5 projects, which can be challenging to comply with.
During my years of experience with the EB-5 program, I have observed that many EB-5 project developers do not place enough importance on one of the most important elements of an EB-5 offering: a compliant business plan.
Why Have A Strong EB-5 Business Plan?
Having a strong business plan is essential to the success of an EB-5 project. EB-5 business plans must convincingly show that a project is feasible and will fulfill the criteria of the EB-5 program. USCIS carefully evaluates all EB-5 business plans before granting approval to any EB-5 investor.
Additionally, if an EB-5 project lacks a comprehensive business plan, potential investors are unlikely to subscribe. EB-5 investors typically look for the most trustworthy projects with the lowest immigration risk.
EB-5 Business Plan Guidelines
A 1998 precedent court decision — Matter of Ho — defines the requirements for an EB-5 business plan and provides EB-5 project sponsors with a general outline of what their business plans should look like. In essence, EB-5 business plans must prove that the project will strengthen the economy and create at least 10 full-time jobs per investor.
In this article, I describe five essential elements of a successful EB-5 business plan. Since the regional center and direct EB-5 investment models differ greatly, I also note the differences between business plans for each investment option.
Five Elements Of A Successful EB-5 Business Plan
1. A Clear And Transparent Description Of The Project
USCIS will need to see a comprehensive outline of the EB-5 project’s business model. The business plan should clearly explain the business’s purpose, development timeline, operational plan and financial projections. Moreover, the business plan should provide information regarding the project’s management team, key personnel, professional consultants and contractors and the overall business structure.
2. The Marketing Approach
Every sponsor of a business or project must have a feasible marketing strategy to drive profitable operations. A sponsor’s marketing approach to find EB-5 investors is equally important. EB-5 projects should consider producing a set of marketing materials, scheduling a series of seminars for potential investors and possibly working with foreign migration agents.
Additionally, investors from different regions will have varying expectations and criteria when they search for available EB-5 projects. Therefore, the marketing plan must be tailored to each target EB-5 market.
As part of the marketing approach, EB-5 project developers should provide information on how involved their investors will be in business operations. In regional center–sponsored projects, EB-5 investors typically subscribe as limited partners. As such, their involvement in business management will likely be confined to voting on certain issues. In contrast, direct EB-5 investors typically have more control over how their capital is used. Some direct EB-5 investors participate in the management of day-to-day operations. Of course, an investor’s level of involvement also depends on the project’s management structure.
3. Employment Creation
Since generating jobs is one of the main objectives of the EB-5 program, the employment-creation section of the business plan is critical. The business plan must describe how many jobs will be created, the nature and responsibilities associated with each position and an anticipated timeline for hiring the employees. Job creation must be carefully considered to ensure that every EB-5 investor is allocated at least 10 permanent full-time positions.
The methods for demonstrating employment creation differ significantly between regional center and direct EB-5 investment projects. Direct EB-5 investment projects can count only direct employment or full-time jobs that appear directly on the new commercial enterprise’s payroll. In contrast, regional center projects can count direct, indirect and induced positions. Indirect and induced employment is calculated by using development expenditures and operating revenues as inputs to an econometric model.
4. Financial Projections
EB-5 business plans should also demonstrate a project’s ability to succeed financially. The business plan must include financial projections, including estimated revenue, expenses and other details. All projections must be supported by credible third-party data and/or market or feasibility studies. Many project developers commission a financial analysis from a third party. In addition, the business plan should outline specifically how the EB-5 investment capital will be used.
Financial projections will partly depend on the project’s investment model. For instance, direct EB-5 investment projects typically have smaller offerings, and their investors usually receive higher returns.
5. Required Documentation
EB-5 business plans must demonstrate that the project has obtained, or will obtain, all required permits and/or licenses to operate legally. These permissions may be required at the local, state and federal levels. If the project is sponsored by a regional center, the business plan must also provide information on the regional center and provide proof that it has received designation from USCIS.
Crafting a successful EB-5 business plan requires professional execution and careful preparation. Still, the EB-5 investment industry has never been more promising. Since the minimum investment amounts were lowered on June 22, 2021, foreign nationals can now make a direct EB-5 investment at only $500,000. Consulting with EB-5 professionals and legal counsel will be invaluable as sponsors structure projects and prepare to raise EB-5 investment capital.