Participation in the EB-5 program requires two components – the investor’s personal documents, including documents confirming the legality of receiving funds, and project documents. Accordingly, the risks of participating in the program are the rejection of the investor’s petition based on the investor’s personal documents and project documents.
Investor’s personal documents
When preparing a petition, it is important to select a lawyer with experience with the EB-5 program, who has statistics on the processing of applications in order to minimize the risks associated with personal documents. Even if you have sufficiently transparent documents, an incorrectly prepared package of documents can lead to a request for additional information or a refusal.
EB-5 Project Documents
The situation looks much more complicated if we are talking about the second component of the appeal – about the project documents.
When choosing a project, it is important to consider the different nature of the risks. The risk of losing funds comes first. According to the documents, if you participate in the I-751 program, you assume the risk of partial or complete loss of funds if the project is unsuccessful. If the representatives of one of the Regional Centers (RC) , which is engaged in projects under the EB-5 program, assure you that there are no risks, then we strongly recommend that you look at the projects of other RCs.
At the same time, this in no way means that any of the participants in the process can simply take and not return the invested funds. Project documentation is drawn up in such a way that the possibility of non-return is completely excluded, and the investor under the program can go to court to recover the amount invested. Nevertheless, if something went wrong with the EB-5 project, and it does not generate enough profit, or there is no possibility of refinancing and attracting alternative capital, then there is a high probability that the funds may be returned not on time and at the in full. Accordingly, it is extremely important to take a responsible approach to the choice of the project itself, carefully study the information about the borrower, the financing structure and marketing analysis to reduce risks.
the ability of the Regional Center
The second group of project risks is the ability of the Regional Center to correctly draw up project documentation and business plan and bring the process to the end. Since 2012, the number of Regional Centers has increased at a very fast pace, and many of the Centers that have received licenses have done this to quickly attract an alternative source of investment for their projects, without in-depth analysis of the principles of the program.
In this regard, for many projects a situation arose when the RC was unable to recruit the required number of investors and did not fulfill its obligations to the owners of the facilities. Not all projects were prepared for the amount of documents required by the project, as well as the costs of the work of lawyers to prepare such documentation.
In addition to the above, it is worth noting that the second part of the process – petition 829 – requires very detailed information on the costs of the EB-5 project, prepared in accordance with the requirements of the immigration authorities. If the RC does not have its own specialists and the reporting process is not well-functioning, at this stage there may also be risks of failure.
Therefore, in addition to information about the I-765, it is imperative to look at the statistics of the Regional Center itself and request all the information you are interested in, both on the project and on the RC.
The relevant information that it makes sense to obtain from the Regional Center is presented below:
- How many approved petitions 526 and 829 does the RC have?
- For how many projects has the RC already returned investments?
- How can the RC confirm the provided data?
- Was the return on investment for all projects made on time and in full? If there were projects with payment delays – what are the reasons for the delays? What has been done by the RC to resolve this situation?
- Has the DC received any rejections regarding its business plans?
- Who in the RC is involved in the selection of projects, what are the requirements for projects?
- prepares business plans and project documentation?
- Who will work with you if something happens to your contact person (for example, he or she quits)?
- What is the exit strategy for the project?
Thus, despite the presence of risks of participation in the program, the investor can significantly reduce them if he chooses the right project.