Evaluating EB-5 Projects for Safety of Capital

For many investors into the EB-5 program, one question that concerns them is whether or not their investment will be safe. Although the investment must be “at risk” to qualify, there are a number of ways in which capital is safe while still meeting EB-5 program requirements.

Here are a few things that can be done to help secure the investment:

EB-5 Document Review:

When following the EB-5 due diligence process, it is important to keep each of the documents up to date. For example, each of the agreements needs to be reviewed and understood completely.

Such agreements may include the escrow, operations, business plans. Targeted Employment Area (TEA) designation letters, equity letters, impact studies, appraisals, loan agreements and the construction schedules.

Other questions that may need to be asked when reviewing the documents are as follows;

  • How is my investment structured to meet my needs?
  • Can the project generate enough revenues to repay loans?
  • Is the exit strategy understood and can be easily followed?
  • What is the percentage EB-5 capital tied up in the venture? Is it higher than 30%?

When performing the due diligence on the Regional Centers, it is also important to see what their past experience has been. While past success cannot truly represent what may happen in the future, it is still important to consider before choosing the right one for you. One should consider the following;

  • I-526 Petition approvals gained
  • I-829 Petition approvals gained
  • What is the number of competed projects
  • Number of investors have chosen to invest with this regional center?
  • The number of jobs created?
  • Number of investors who have received an ROI?

Consider their job creation methods

  • What is their Job creation buffers?
  • Has their method been successful?
  • Are indirect and induced job creation used effectively?

Pay a visit to the project location

Before making a final decision on the project that is offered by the Regional Center, it is a good idea to pay a visit to the actual site. Much can be learned about the project by visiting the site in person and witnessing it for yourself. For example, will be able to determine the following;

  • What point is the construction process in?
  • Is the Regional Center being honest about the project?
  • Is the Regional Center being transparent?
  • Do you have access to all the documentation?
  • Are you being protected against fraud?
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