If you have always wanted to start a business and live the American Dream, the EB5 visa can seem like the golden ticket to your dream life. And, for investors with the right resources, it is! But when it comes down to navigating the logistics of investing abroad and fulfilling the requirements needed to obtain a green card, the process gets all the more complicated.
Before you even know it, you’ll find yourself making one of the most decisive choices of the entire process: choosing between a direct and a regional center investment. While there is no simple answer to your dilemma, here are some advantages of direct EB5 investments worth considering.
How to Find an EB-5 Visa Project to Invest In
The EB5 visa – or the Fifth Employment-Based Preference – is an optimal pathway for investors, and their immediate family, to get a green card and become lawful permanent residents of the US.
Brand new legislation just earlier in March, 2022 for the EB-5 Program specifies that future investors are required to invest up to $800,000 for Targeted Employment Areas, or $1,050,000.
While it all sounds straightforward, in practice, the process can be lengthy and challenging. And, the first hurdle you’ll need to overcome is finding the right project to invest in. There are two main options for investors:
- EB5 regional centers investment – Today, there are 632 investor regional centers across the nation, which are USCIS-designated entities with the aim to sponsor EB5 projects. Investing in a regional center means investing in a commercial enterprise associated with these entities.
- Direct investment – making a direct EB-5 investment means bypassing the regional centers and starting a new business, purchasing an existing company, or buying equity in an enterprise.
Direct investments give you the operative and creative freedom to bring to life your own venture and invest in a real, operating business. However, eligibility requirements are more stringent, and you will be directly responsible for creating and maintaining 10 full-time jobs for qualified employees – not counting your family members!
Here are some of the unmissable benefits of this choice.
You Can Retain Better Control Over Your Business Venture – But You Can Choose to Passively Manage It
When investing in a regional center, you will have very limited control over your business’s operations. In some cases, your managerial power will be limited to sharing your vote in major decisions.
For investors who wish to have little involvement with the project while still securing a green card, this is the perfect option. However, if you are looking to be more involved with your business’s venture and use a hands-on approach towards its operations, making a direct investment could be the only way to retain control.
(Pro tip – with an EB5 direct investment, you can be as involved as you wish to be. If you are looking to passively manage a business while enjoying the benefits that come with a direct investment, you might consider buying equity in an existing business.)
A Direct Investment Can Help You Lower Your Administrative Fees
When investing in a regional center, you will need to budget for the fees associated with managing your project. These include legal fees, project administration fees, and filing fees, which can amount to $50,000 – $70,000.
According to USCIS guidelines, when such fees are requested by the job-creating and managing entity, they cannot be part of the amount invested, but be in addition to it.
When opting for direct investments, you’ll be able to keep overhead costs low, save on administrative costs, and dedicate your entire allocated capital to launching your business venture.
You Can Enjoy Shorter Timelines and a More Straightforward Process
There certainly are advantages to investing in a regional center – including the fact that you won’t have to worry about creating 10 full-time jobs and can count on a predictable exit strategy.
However, this ease of investment comes at a major bureaucratic cost.
From dealing with unobtainable project preapprovals to undergoing lengthy applications, submitting rigorous economic reports, and meeting strict eligibility requirements, regional center EB5 projects can take between 7 and 12 months to kick off.
Oppositely, EB5 direct investments allow investors to start developing, marketing, and seeking external funding virtually immediately.
You’ll Face an Equal Level of Investment Risk
Whether launching a start-up or establishing a large chain business, calculating the risk involved with the investment is a top priority for investors.
So, it is normal for first-time funders to seek administrative and operational support. But, despite the perceived safety of regional center investments, they don’t reduce or minimize investor risk.
On the other hand, direct investments will offer you full control over your business’s operations, which could be a significant advantage for experienced and successful entrepreneurs.
EB5 Direct Equity Investments Can Increase Your Earning Potential and Returns
While approved regional centers are a suitable – and somewhat safer – alternative for inexperienced investors, their sponsored projects provide minimal returns.
At the same time, the high initial investment required for an EB5 visa, when used wisely, can lead to significant returns.
Ultimately, it all depends on your risk tolerance, business vision, and experience – but opting for direct EB5 investment is the only way to remove any earning caps associated with working with a regional center.