Relationship between job creation and return of EB-5 investment principal.

“If my I-829 is denied because the Regional Center project fails to create the necessary jobs, does that mean I lose my principal?”

This is a common question asked by prospective investors stemming from confusing the immigration process with the investment process. While the EB-5 investor is investing in order to obtain a greencard, legally, the two are separate processes.

The following assumptions are being made in the picture below:
1) 5-year term loan;
2) the loan to the project is made immediately after the I-526 is approved (while the funds are released from escrow immediately after the I-526 approval, depending on how the deal is structured, these funds can be held until other investor’s I-526s are also approved);
3) the I-485/consular interview process is completed in 6 months.

In theory, there are four different outcomes in a “loan-based” EB-5 process.

1) Greencard approved (A) + Principal returned (B)
2) Greencard approved (A) + Lose principal (because something goes wrong with the project between point A and point B and borrower fails to repay at the end of 5 years)
3) Greencard not approved (because required number of jobs not created at point A) + Principal returned (because project went ahead despite intial delay and borrower repays principal)
4) Greencard not approved (because required number of jobs not created at point A) + Lose principal (because of borrower’s inability to repay at the end of 5 years)

Note, again, that this is assuming that the EB-5 investment is a loan-based investment and not an equity based investment. Please bear in mind that this is a simplified scenario. In real life, the lender’s interest is likely to have been secured so the Regional Center will look to enforce its security interests. Also, as mentioned in the assumptions above, the timing can be off if the Regional Center waits for other I-526s to be approved before making the loan. Furthermore, the USCIS has indicated that even if the jobs have not been created yet, they will look to see if the jobs “can be expected to [be created] within a reasonable period of time.” Suffice it to say that in the legal world, “reasonable” is a double-edged sword: it can save you or open up a huge can of worms.

Resources

History of the EB-5 Visa Program

EB-5 Policy and Legal Considerations

FREQUENTLY ASKED QUESTIONS FOR THE EB-5 VISA

EB-5 Regional Center list state by state

American Immigration Lawyers Association EB-5 Committee and Invest In the USA

Due Diligence Issues for EB-5 Investments

Retainer agreement disclosures, confirmations, warnings and conflict waivers:

USCIS Executive Summary May 2012 EB-5 Immigrant Investor Program

Governors office of California EB-5 UPDATE

Investor Options: E-2 versus EB-5

Advantages and Disadvantages of the E-2 and EB-5 Visas