What Are the Hazards of Applying for the US EB 5 Visa Program, and How Can You Handle Them?

In recent years, the U.S. EB-5 Investor Visa Program has grown in popularity as a means of immigration for prosperous Indian families. By investing in a U.S.-based venture that creates at least ten full-time employment for U.S. citizens, visa program participants can earn permanent U.S. residence. There is a current $800,000 cap on funding for projects in rural and remote areas. On January 18, 2023, $800,000 was roughly Rs6.5 crore.

The fact that it is one of the quickest routes to a Green Card in the United States is the program's primary selling point. Foreign nationals now have the same opportunities as native-born Americans. If you have a green card, you may work for smaller companies, join start-ups, and even establish your business in the United States without worrying about being sponsored for a work visa. After living in the United States for five years with a green card, one can apply for citizenship.

However, there are several factors to consider before making an EB-5 investment. Be wary of potential dangers. U.S. authorities may refuse to provide a green card if these risks are not well understood or handled, and investors may lose all or part of their money if they fail to obtain an EB-5 visa for the United States.

How Individuals Can Apply for a U.S. EB-5 Visa

To qualify for the EB-5 visa, investors must either make a direct equity investment in a U.S. business that creates 10 local jobs, or they must work with a Regional Center approved by the U.S. Citizenship and Immigration Services (USCIS), a licensed body that pools funds from EB-5 investors to invest and create jobs on their behalf. The EB-5 Regional Center Program describes the second option.

After an EB-5 visa application is submitted, whether through the direct or indirect route, the immigration procedure begins simultaneously with the investment process. The two paths are parallel yet distinct. Hence, you may gain your US green card but lose your investment in the enterprise, or vice versa.

To acquire your green card and have your money returned without any problems, you must know the immigration and financial risks associated with the U.S. EB-5 Investor Visa Program.

Immigration Risks in the U.S. EB-5 Visa Program

After two to three years of filing an EB-5 application, investors can expect to receive a conditional green card (for Indian-born applicants, based on current processing timelines). Obtaining a conditional green card paves the way for an individual to settle in the United States for education, employment, and maybe even entrepreneurship. For investors, the process to change their conditional green card to a permanent one typically takes two years from the time it was issued. They can now request a return on their initial investment if they want.

Denial of the Conditional Green Card or inability to convert it to a Permanent Green Card is the primary risk in immigration. The following factors can bring this about:

1) Investor's source of funds is not documented sufficiently to satisfy the USCIS authorities

Investors must produce paperwork detailing the origin and acquisition of their investment funds from the moment they were first earned or obtained until they are placed into the project's escrow account to meet EB-5 standards.

It is crucial to engage with an expert immigration lawyer who will produce a complete study of the source of your assets because every investor collects cash differently, and USCIS officials place a high level of scrutiny on the funds' source. You can get a Request for Evidence (RFE) or possibly have your conditional green card denied if USCIS adjudicators find this analysis imprecise. You must provide both the documentation for the initial purchase and the documents linked to the sale of the real estate property, for example, if that is how you want to get the money. Depending on an applicant's source of funding, different documents are required.

The procedure is more difficult for Indians since they must follow Indian legislation governing investments abroad. While investing overseas, Indian citizens must adhere to several rules, including the Foreign Exchange Management Act (FEMA) and the Foreign Exchange Reporting Standards (FRS).

2) Your investment does not result in the creation of 10 jobs, and the project does not meet the requirements of the EB-5 program.

For every EB 5 family that invests in the project, 10 jobs must be created. The EB-5 investment should not be necessary to keep the enterprise running and hiring people.

Before investing, EB-5 applicants should investigate the project sponsor's background in construction and project completion, as well as their level of familiarity with the EB-5 investment program. It is mitigated to a considerable part by the fact that many high-quality EB-5 projects begin adding employment before all EB-5 cash is received, and/or have a buffer of 2x or more jobs per investment.

The conditional green card is only available to those whose direct investments in businesses result in the creation of at least ten permanent, full-time jobs. Moreover, if the investment is through a Regional Centre initiative, all employment created by the project, direct and indirect, will contribute toward the investor's immigration advantage.

Your investment project and any associated regional centers must adhere to the EB-5 Reform & Integrity Act requirements, a piece of legislation passed in March of 2022. Your Green Card application might be denied if the project does not follow all applicable rules and regulations.

3) You fail to satisfy basic residency/travel conditions

After receiving a conditional Green Card, the primary applicant must adhere to the Conditional Residency's minimum travel or residency requirements. To maintain their status as Conditional Green Card holders, applicants should not be absent from the United States for more than 180 days at a time. What this means is that the candidate must come for a visit once every 5–6 months.

If you qualify for an exception, you should talk to an attorney about the process.

Financial Risks

To qualify for an EB-5 visa, the investor's funds must be "at risk," and the visa criteria state that no assurances may be given regarding the return on, or of, the funds. What this implies, in plain English, is that if you aren't careful, you might lose everything you've spent on your green card application. On the other hand, you shouldn't put all your eggs in one basket if you're afraid of losing money. Taking the right precautions to control risk will help you keep your money safe.

Successful EB-5 projects are typically structured conservatively, to preserve capital while creating new positions. While the profits on certain projects may be poor, they may be well-designed to safeguard investment resources. Some alternatives might provide more lucrative rates of return, but at the expense of a little bigger default risk and, therefore, a more significant chance of capital loss. As the invested capital is effectively locked up for 5-7 years, one must also consider the liquidity risk.

The company you're considering funding must have a solid strategy for how to use your money. Knowing how the project intends to return your money (exit strategy) is just as important as having a framework that gives you faith that the project will be finished on schedule and generate employment. Loan investments are more likely to be safe than stock investments. The presence of sponsor capital and other reputable lenders on the capping stack, together with a transparent and healthy capital structure, should put your mind at ease. Learn about the other parties involved in the project, such as the developers and fund managers, as they will be the ones who generate the required employment, run the show, and return the funds.

Around 95% of EB 5 investors have traditionally selected the Regional Center option, perhaps because of the bigger job buffer and the complications inherent in the "DIY" approach of direct investment. The risk-reward trade-off is that you forego some possible gain from switching to the direct program. It's not that you should never take on Such initiatives; rather, you should tailor each to your unique risk tolerance and evaluate it well before proceeding.

Note: This website's material is provided for informational purposes only; it does not represent legal or financial advice. Only a certified professional with a complete grasp of all the facts and circumstances surrounding your particular case can give legal or financial advice. Before applying for the EB-5 program, you should consult with a visa attorney who specializes in legal, immigration, and financial matters.