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EB-5 Direct vs Regional Centre

Comprehensive Overview. Investment $800,000

EB-5 Direct vs Regional Center: A Comprehensive Overview. Investment $800,000

Direct EB-5: Pros

  • Owning some equity in the business
  • Having more control over the management of the business
  • Higher returns

Direct EB-5: Cons

  • Substantially higher EB-5 denial rate
  • Secondary/contracting jobs cannot be included in the EB-5 job count for compliance. Often secondary jobs account for 2/3rds of the workforce
  • Far higher EB-5 denial rate compared with regional centre EB-5
  • Unsecured EB-5 investment loans are unlikely

Regional Centre EB-5: Pros

  • Now possible to own equity in the project
  • Now possible to receive very high returns
  • Unsecured EB-5 investment loans are available
  • Direct and indirect/secondary jobs are included in the EB-5 job count. Making compliance for permanent EB-5 far easier
  • Far lower EB-5 denial rate compared with Direct EB-5

Regional Centre EB-5: Cons

  • Most project have a longer repayment term compared with Direct EB-5. However, many new projects do not
  • Less control over type of project, location and its ownership

Retiring to the USA from the United Kingdom

Since its inception in 1990, the EB-5 Immigrant Investor program has provided a pathway for foreign nationals to attain lawful residency in the United States through investment in new commercial enterprises (NCEs). While indirect investments through regional centers have been popular, direct EB-5 investments at $800K offer a compelling alternative for investors seeking more control and transparency.

Understanding Direct EB-5 Investments

Direct EB-5 investments involve investing directly into an EB-5 project rather than through a regional center. This approach necessitates meeting stringent criteria, including creating a minimum of 10 full-time jobs and complying with USCIS regulations. Unlike indirect investments, direct investments focus solely on directly created jobs, which must be filled by qualifying U.S. workers and appear on the NCE’s payroll.

Key Differences Between Direct and Indirect Investments

One of the primary distinctions lies in the employment creation process. Direct EB-5 projects count only directly created jobs, while regional center projects can also include indirect and induced employment. However, regional center projects face a cap on the percentage of indirect and induced jobs they can claim towards the total job creation requirement.

Navigating Project Structure

Direct EB-5 projects typically involve simpler structures, with the NCE and the job-creating entity often being the same entity. In contrast, regional center projects may involve multiple entities, allowing for more flexibility in job creation calculations. Loan models are rare in direct EB-5 projects due to the requirement for the NCE to receive the investment directly.

Dependence and Independence

Unlike indirect investments, direct EB-5 investments do not rely on the authorization of a regional center. However, such authorization helps protect investors and to impose regulatory compliant behaviour upon the Regional Center. Direct investors must meticulously adhere to USCIS regulations and provide ample evidence of job creation when filing their petitions. Many fail at this hurdle.

Creating Business Plans for Direct EB-5 Investments

Investors must submit a detailed business plan demonstrating how the EB-5 project will fulfill the job creation requirement. This includes outlining projected staffing needs, job descriptions, and hiring schedules.

Types of Direct EB-5 Investment Businesses

Investors have a range of options, including opening new branches of existing franchises, purchasing and scaling up existing businesses, or investing in retail, wholesale, or restaurant ventures.

Investing in Existing Businesses

While allowed, investing in existing businesses requires thorough restructuring to qualify as an NCE. Investors must ensure that the investment leads to significant staff count or net worth increases or results in the creation of a new business entity.

Involvement and Decision Making

Direct EB-5 investors are expected to have some level of involvement in managing the NCE. The extent of involvement depends on the management structure of the business.