I am the Managing Partner of EB5AN—a national EB-5 visa firm with 2,000+ foreign investors from 60+ countries.
American business owners are currently contending with increasing interest rates and economic uncertainty propelled by a couple of high-profile bank failures. In this economic climate, many businesses are now more open to alternative financing options, especially given the high cost of credit.
Some are turning to funding from EB-5 visa applicants to fulfill this need and inject capital into the areas of the United States that need it the most. In keeping with these objectives, the EB-5 Reform and Integrity Act of 2022 (the “RIA”) now incentivizes EB-5 visa applicants to invest in rural U.S. areas. These incentives have the potential to inject millions of dollars into rural economies and help businesses secure financing.
At the same time, EB-5 visa applicants who invest in rural projects can also be eligible for priority processing to receive U.S. green cards faster than otherwise possible—even if their countries of origin have a backlog of EB-5 applications.
So, how can investors find a reliable rural EB-5 project?
Prepare yourself for the challenges.
I’ve noticed an increasing number of businesses in rural areas are exploring the possibility of raising EB-5 funds. Despite the advantages, rural EB-5 projects come with unique challenges. They must be situated outside metropolitan statistical areas (MSAs) and have populations of 20,000 or fewer. This geographic constraint introduces an element of risk to rural EB-5 investments.
While EB-5 financing is appropriate for a wide array of industries, real estate developments tend to be a popular choice among investors. Consequently, I’ve observed that rural EB-5 projects in sectors such as luxury housing or hospitality may struggle to achieve financial success. These types of investments often depend heavily on future demand and may take several years to yield profits. This delayed return can make it less likely for EB-5 investors to fulfill the requirements of creating 10 jobs for immigration purposes and receiving a timely return on their investment.
Given that rural EB-5 projects are located in less economically developed regions, having secure financing, preexisting job creation and an independent developer becomes even more crucial for investors.
Engage in thorough due diligence.
To mitigate potential risks, I suggest EB-5 investors engage in thorough due diligence to evaluate the viability of a project. Some key aspects of this process include analyzing the project’s financial structure, management team and market demand. Furthermore, it’s important to assess the developer’s track record and the project’s job creation, which are both critical factors in the EB-5 program’s success.
Establish a solid financial structure.
First and foremost, a solid financial structure is vital for a project’s stability. Examine the source and reliability of funds, ensuring that the project has already secured sufficient capital to cover all phases of development, preferably through a senior loan with a major bank.
Additionally, make sure you are aware of any possible contingencies or fallback options in case of unforeseen circumstances. A well-planned financial structure can minimize the risk of project failure and protect investors’ interests.
Pay careful attention to program requirements and the developer’s track record.
In addition to these factors, the developer’s track record can be a key indicator of a project’s potential success. I suggest investors scrutinize the developer’s history, including their completed projects, financial stability and overall reputation in the industry. A developer with a proven history of successful EB-5 projects is more likely to deliver positive outcomes for investors, in my experience. Furthermore, any partnerships or affiliations with well-established companies or organizations can be a sign of the developer’s credibility and reliability.
Finally, the ability of a rural EB-5 project to create the required number of jobs for investors is crucial. Carefully evaluate the project’s job creation, which should be supported by a comprehensive economic impact analysis and construction expenditures.
How do rural EB-5 investments impact the immigration timeline?
EB-5 investors in rural areas are now eligible for set-aside visas and priority processing of Form I-526E (the initial application in the EB-5 process). This could take years off the immigration timeline.
Certain countries experience a backlog of EB-5 visa applications due to the limited number of visas available each year. Although the yearly supply of EB-5 visas is generally sufficient to cover global demand, each country is entitled to a maximum of 7% of the total number of EB-5 visas. Consequently, investors from high-demand countries often face additional waiting periods before receiving their EB-5 green cards and immigrating to the United States.
For example, both Chinese and Indian investors face a backlog of EB-5 applications. This issue arises from the overwhelming interest in the program, coupled with the visa cap for each country. However, EB-5 applicants could potentially avoid these additional delays by investing in rural areas.
The RIA sets aside 20% of the yearly number of EB-5 visas exclusively for investors in rural projects. This means that Chinese and Indian investors who participate in rural projects can obtain their green cards upon approval of Form I-526E, regardless of their country’s backlog. This strategy allows investors from high-demand countries to expedite their immigration process.
In addition to the RIA, rural EB-5 projects also grant investors priority processing of Form I-526E. According to USCIS’s “Check Case Processing Times” page in April 2023, 80% of I-526E applications from China are processed within 79 months, while 80% of Indian I-526E petitions are processed within 52 months. Although actual processing times may be shorter than these ranges, priority processing could shorten the EB-5 immigration timeline for rural investors.
Amid the current economic climate marked by soaring interest rates and overall uncertainty, many American businesses are increasingly turning to alternative financing sources, such as the EB-5 visa program. By investing in rural EB-5 projects, investors from countries experiencing a backlog of applications could get through the immigration process quicker while simultaneously injecting much-needed capital into underserved areas of the United States.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.