EB-5 Direct Investment or Indirect Regional Center Investment By Gregory Finkelson
EB-5 Direct Investment or Indirect Regional Center Investment - Which Is Better?
EB-5 Direct Investment is like a tree that gets lost in the forest of foreign investment options. This could be due to several factors, not the least of which is the increasing number of EB-5 related businesses seeking multiple investors to fund large projects that require raising large amounts of capital far in excess of the individual minimum $500,000.
A direct investment requires creation of at least ten new W-2 jobs within the company in which the immigrant investor contributes equity. The direct approach is often more appealing to those who desire to earn a higher return on investment. Structurally speaking, the potential for a greater ROI is higher, but as in any risk versus reward equation, not only does the greater risk increase the potential for reward, but the potential for greater reward also increases the risks.
Efficiency and versatility are often cited as advantages of direct investing. There is no regional restriction on the development of an investment project, so projects can be developed anywhere in the US. The USCIS approval process takes less time with a direct investment, which works to the benefit of both the project and the immigrant investors.
Which is better Ė direct or indirect investment? The question itself seems to beg that the answer is one or the other, black or white. In reality, the answer is that the better investment is the one that is most suited for the individual applicant.
Why Use a Regional Center?
The point of a Regional Center is to be chartered by the USCIS to pool capital for job-creating investment projects and to facilitate both the investment and the immigration processes. While the process is slower, it is arguably more secure and has several immediately distinct advantages, not the least of which is that an RC can obtain pre-approval of proposed projects. While this adds time on the project side, once the project is approved, the investor side of the project should be shortened considerably.
In terms of job creation, Regional Centers projects have a versatility of their own, as jobs created need not be direct or even indirect, as even induced job creation through the downstream impact may be taken into account. The provision allows for much broader prospects for fulfilling the EB-5 job creation requirements.
From a financial perspective, participation through Regional Centers can be structured in a manner where the individual investments can be pooled into a limited partnership that then loans funds to the project. This creative route has a built-in exit strategy, otherwise known as the term of the loan.
At first glance, EB-5 appears to be a one-size-fits-all, but that is simply not true. No one expects immigrant investors to come to the US in a straightjacket. A vital part of the EB-5 visa program is that it can be tailored to fit individual investors so that they arrive in style.