Regional centers are entities that pool investment funds from several EB-5 investors for the development of large-scale projects like hotels and condominiums. These centers are approved by the USCIS to sponsor the EB5 projects.
Direct EB5 investment is an investment you make directly into the enterprise without involving the regional centers. A few examples of direct investments include:
- Start your own business
- Invest in an existing business
- Purchase an existing business
If you want to know more about EB-5 programs, and what are the possibilities of reopening of the regional center EB-5 visa program, read this.
Direct EB-5 vs. Regional Center Program
|Difference||Direct EB-5 Program||Regional Center EB-5 Program|
|Investment Path||The investment capital is put directly into the new commercial enterprise and is in control of the investor throughout the investment period. The timing of the job creation is also controlled by the investor and is based upon the business needs.||The investor sends the funds to the investment pool, the new commercial enterprise designated by the regional center. It is then transferred to the job creation entity. All the foreign investments from several foreign investors are combined at the job creation entity.|
|Creation of Jobs||It requires the business to create and sustain 10 full-time jobs for 2 years.||It allows for the use of econometric formulae that takes the construction (or other qualifying capital expenditures) and operations to arrive at a “job count” that accounts for direct, indirect and induced jobs based on the concept of “economic effect” of the project.|
|Investment Capital Type||Contribution can be of various forms, including equipment, cash, property, inventory or other tangible equivalent assets.||It requires cash transfer to meet the capital investment requirements.|
|Role of Management||The investor cannot make a passive investment. They have to be an equity investor in the job-creating enterprise through the issuance of common shares or preferred equity. The investor has to be at least in an advisory capacity. This structure allows the investor to earn more ROI.||As the investor is an investing member or a limited partner in a limited liability company, they do not have to meet the daily operation obligations.|
|Project Marketing||The business can immediately market the project to investors virtually without obtaining the USCIS preapproval.||The USCIS preapproval must be obtained before marketing the project to the investors while ensuring all the documents comply with the Exchange Commission and US Securities requirements.|
|I-829 Remove Conditions||The investors must document the actual number of US workers through tax returns and payroll records with the proof that each employee is either a US citizen, permanent resident or qualifying employee.||The investors do not need to meet this criterion. The job creation requirement is met through different counting mechanisms using an econometric methodology (RIMMS II model)|
Advantages of Direct EB-5 Investment Program
Reduced Investment Amount
A direct EB-5 investment amount is currently at $500,000 (previously at $900,000). There is a possibility of the investment amount going up again. If that’s going to happen, this could be the last opportunity for you to invest at a reduced amount.
Since you invest directly into starting a new business or purchasing an existing one, you have the freedom to run the business how you want to. On the other hand, the regional center program offers little control over the business.
Less Policy Risk
The direct EB-5 policy is permanent. Alternatively, the regional center program is temporary (now closed) and relies on congressional extension for reauthorization. Failure in the reauthorization of the regional center EB-5 program can negatively affect the investors. Moreover, if a regional center doesn’t raise enough capital, the project might get delayed, or it might not even get off the ground. Additionally, if the regional center isn’t creating enough jobs, the investor might not even get a green card.
When you make a direct investment, there is no middleman involved. This means that you are likely to earn higher returns because whatever the project pays as a return to EB-5 investment invariably comes to you. As with regional centers, they raise the capital into a fund, and then they loan the fund to the projects, making money on the interest.
More Investment Options
Most regional centers are limited to specific industries, which might not interest the potential investor. Direct investment allows you to invest in any business as long as it is legal and meets the requirements.
No Administrative Fee
A direct EB-5 direct investment does not charge a syndication fee or administrative fee. However, regional centers charge around $50,000 to $70,000 as a one-time management fee or an administrative fee for managing the regional center project and paying for other expenses.
Diversification and Globalisation
Business can be easily diversified with a direct investment, especially if the investor already has a business in their home country. This means better networks, more ROI, and more opportunities to form global partnerships, which is not possible with regional center investments.
If you have any questions regarding the EB-5 visa or need help with your EB-5 visa application, contact us.