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America’s EB-5 program offers the coveted US Green Card to foreign investors willing to put capital into US based projects which create jobs and help boost the U.S. economy. There are two different routes for EB-5 investors: The traditional Eb-5 Direct Investment Program and The Regional Center Program.
As an investor, you can choose which program route suits your situation best. Although there are significant differences, especially under new rules announced in March 2022, the results are the same – U.S. permanent residency and a path to U.S. citizenship. In this article we walk investors interested in the US EB-5 Program, through the requirements of each route, their benefits and the key differences between both paths to a US Green Card.
The US EB-5 Direct Investment Route
Only a very small percentage of EB-5 investors choose the EB-5 direct investment route, mainly because of its requirements towards the creation of at least 10 new, direct, full-time jobs lasting for a minimum of two years – a responsibility which falls directly on the investor in a direct EB-5 path.
The applicant must invest in a new commercial enterprise. Although previously, multiple EB-5 investors could pool together in a direct investment, under the most current regulations, there can only be one EB-5 investor in each direct project or business. The commercial enterprise can also be structured in a number of different ways, including as a sole proprietorship, joint venture, partnership, and limited liability company.
Requirements of the EB-5 Direct Investment Route
- The investor must invest a minimum of $800,000 if in a TEA (Targeted Employment Area) or $1.05 million in all other areas.
- The funds must come from a lawful source.
- The enterprise will directly create 10 full-time jobs within two years of its incorporation. Jobs created must be shown on the business’s payroll and employees must be directly employed by the enterprise in which the funds are being invested.
- The investor will likely play an active role in business operations although this is not mandatory.
There are a separate set of rules which apply to those who want to purchase an existing business, such as requirements for a percentage increase in turnover over time, showing the investment funds are going into a defined expansion of the business, or in some cases, changing the business completely so that it falls under the definition of a “new commercial enterprise” under USCIS EB-5 program regulations.
Since each direct case is unique, we encourage investors to speak to us directly to strategize and find out if a direct path is right for them.
Benefits of the EB-5 Direct Investment Route
- If the business is successful, the investor could potentially receive great financial rewards.
Pitfalls of the EB-5 Direct Investment Route
- Liability for job creation falls on the investor directly
- Investment often becomes far more expensive than $800,000 USD or $1.05 million USD due to employee costs, and business plan and business document writing and compilation.
- Many businesses in the US fail within the first 1-2 years and in order for the investor to get the permanent green card, the business must survive and be operating for at least 4 years if not more.
The US EB-5 Regional Center Route
The US EB-5 Regional Center Program was first introduced as a pilot program under the traditional Direct Program in 1993. It was launched to allow investors to pool their investments in larger projects and to play a more passive role in their investment and EB-5 process.
What is a Regional Center?
Regional Centers are administrative bodies approved by the US government to operate in specific geographic areas and identify projects which would benefit and flourish from foreign investment capital whilst also meeting the government requirements for investors to obtain a US Green Card. The primary function of a Regional Center is to raise capital from foreign investors for various U.S. projects. In addition to providing low-interest capital to developers, most successful EB-5 Regional Centers generally provide a five to seven year repayment window so long as the structure coincides with the EB-5 immigration process.
Requirements for the US EB-5 Regional Center Route
- The investor must invest a minimum of $800,000 if in a TEA (Targeted Employment Area) or $1.05 million in all other areas.
- The funds must come from a lawful source
- 10 direct or indirect full-time jobs must be created using the investor’s funds.
Benefits of the US EB-5 Regional Center Route
- Under the Regional Center program, indirect, induced, and direct jobs can be created and counted toward job count, which makes it much easier to attain one of the most important criteria in the success of an EB-5 application.
- The government uses a formula to calculate job creation, rather than counting jobs on the payroll of the company or project allowing for a more streamlined and lenient process in job counting.
- Regional Centers projects are frequently located in defined TEA’s (Targeted Employment Areas), allowing the applicant to invest the minimum amount of $800,000.
- The investor will play a passive role in the project, meaning he/she does not need to be involved in the management of the business or the creation of jobs.
Pitfalls of the EB-5 Regional Center Route
- An investor will have less control over the business and project as they are not actively involved in its operations
- The returns from investing in an EB-5 Regional Center project are usually nominal
Finding the right option for your investment and route to a Green Card will very much depend on your experience, fields of interest, and eligibility. For a more detailed overview of the US EB-5 Process, you can read our blog EB-5 Program Explained.
Conclusion
There are two key differences between the EB-5 Direct and EB-5 Regional Center routes.
The first difference is that, in a US EB-5 Regional Center Program, you invest in a business through a government-approved organization, while in the US EB-5 Direct Program, you invest directly in the enterprise itself which may be privatized. Direct EB-5 investors are responsible for assembling all supporting documentation for their new commercial enterprise investment. However, EB-5 investors seeking to take the route of Regional Center Investments won’t have to prepare project-specific documentation since all of it has already been completed and assembled by the Regional Center itself through various industry legal teams.
The second key difference is related to how job creation is calculated. The Direct Investment Program requires the new commercial enterprise to create only direct jobs which are associated directly with the business or enterprise itself. However, the Regional Center Program allows the investor to fulfil the job creation requirement not only through direct jobs, but also indirect and induced jobs, which are projected by an economist utilizing the government approved formula for job creation.
To summarize, we can say a Direct Investment is best suited for investors who want to own and run a business and who likely have the skills and expertise of owning and operating a similar business abroad. This pathway requires the investor to put time and effort into the enterprise to ensure it is operating and continues to operate throughout the EB-5 process.
On the contrary, a Regional Center investment is ideal for people who have no interest and time to devote to managing a business. The Regional Center path is the best option for those Investors who are simply seeking to obtain a US green card passively, and is the route taken most by EB-5 investors – both business owners and experienced professionals or investors alike.
To learn more about which option might be right for you, consult one of our expert EB-5 lawyers. The Investment Immigration Firm Step Global also provides guidance on the Portugal Golden Visa and Canada Start-Up Visa.
Step Global: Immigration Consultancy in Dubai
Step Global is a leading immigration consultancy and advisory firm in the MENA region, headquartered in Dubai and led by Preeya Malik, a U.S. licensed lawyer and EB-5 expert with over 13 years of experience in this program. The firm advises its clients on the best permanent residency and citizenship by investment programs currently available and safeguard their interest throughout the entire immigration process.
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