EB-5 investments have been a popular option for some time now, and while the regional model was preferred until it was put on hold recently, the direct approach has now begun to gain traction.
If you’re in the dark about EB-5 direct investment, or the concept behind this category more generally, read on for a rundown of the most important facts involved.
Direct projects are for solo investors
With regional investments, it was possible for several parties to get together and create a fund. However, direct investments under this scheme can only be funded by an individual, not a group.
The purpose remains the same; with an EB-5 visa investment, you can get your US green card more easily. However, because you’ll be going it alone, there is more risk involved, and a few more hoops to jump through.
Job requirements must be met within the full-time payroll
Usually you’ll set up an EB-5 investment to help fuel the creation of a new commercial enterprise (NCE), such as a business that you are opening state-side.
There are various requirements to meet to adhere to regulations, including creating a minimum number of jobs to help bolster the local economy. With a direct investment, these jobs have to be full-time positions which are committed to the company’s payroll and are guaranteed for at least 24 months. You don’t have to stick with the same employee in the role, it’s simply that the position must exist for this duration.
Conversely, in the case of regional EB-5 investments, indirect employment also counts towards the job creation aspect, so freelancers and contractors, as well as the procurement of materials from local merchants, would be factored in.
Decision-making is part of the process
Embracing EB-5 direct investment is a good idea if you are not afraid to get stuck in and make high-level decisions about the route that your business project takes.
This is opposed to the hands-off nature of regional funds, which are more appropriate for those who do not mind their money being put towards projects which will ultimately be stewarded by others.
Such a state of affairs should not be surprising given the solo nature of direct investment opportunities, as discussed above. The added control involved could indeed be a selling point for investors who want to eventually attain permanent residency within the US, and also don’t mind putting their business acumen to good use in the process as well.
You will need to analyze all aspects of the project you fund in-depth, and ensure that you have a thorough understanding of its scale, its likely costs, its potential to grow, and so on.
A sizable investment is required
In terms of just how much you’ll have to stump up for a direct EB-5 investment, the entry level amount currently sits at $1.8 million.
This is a healthy sum to start a small business, but of course, if your ambitions are broader, then your investment will have to have enough scope to realize them.
Balancing risk against reward is key
We already mentioned that there is more risk involved in choosing direct investment over regional pools, where EB-5 is concerned.
This could put you off taking the plunge, or it could enliven your entrepreneurial spirit. The thing to remember is that all investments have some element of risk to encompass, whether you put your money overseas or invest in the UK. So, you have to be happy with the extent of the burden you shoulder in this scenario.
If the reward at the end is both a green card and a thriving, US-based business project, then you might think the risk is worthwhile.
The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision. London Loves Business bears no responsibility for any gains or losses.