Financing

Since 1990, EB-5 financing has become an increasingly popular way to fund commercial enterprises and real estate projects at competitive rates.  If you are interested in seeking EB-5 financing for your commercial enterprise or project, here are a few things you should know:

What is EB-5 financing?  The term “EB-5” refers to the fifth employment-based visa preference category under the Immigration and Nationality Act of 1990 (“INA”).  Under this provision of law, foreign nationals may obtain a green card by investing $1,000,000 in a new commercial enterprise in the United States or $500,000 in a new commercial enterprise located in a rural area or an area of high unemployment in the United States.  The investment must create at least 10 full-time jobs for qualified United States workers.

Regional Centers:  EB-5 investment funds may be pooled together by public or private entities that receive approval by U.S. Citizenship and Immigration Services (USCIS) to invest in industry-specific projects that promote economic growth in specific geographic areas.  Such entities are called “regional centers”.  Regional centers market the E-B5 visa program to foreign investors, assist the foreign investors with E-B5 visa applications and invest the foreign investors’ pooled funds in appropriate projects.  Foreign investors that invest through such regional centers are subject to relaxed job creation requirements for their investment (i.e. indirectly created and induced jobs may be counted within the 10 job requirement).

Obtaining Financing from a Regional Center:  If you wish to obtain financing from a regional center, you must find a regional center that operates in your project’s geographic area that is (1) designated to fund projects in your industry or (2) willing to seek an amendment to its industry designation to fund your project.  You should endeavor to work with a regional center that is experienced in doing the marketing and sales activities required to solicit EB-5 investors and that is able to maintain compliance with USCIS reporting requirements.  You can also establish your own regional center to fund your project; however, you should be aware that this is a time consuming and expensive process.

Regional Center Funding Process:  To fund your project, a regional center will typically create a new limited liability partnership and will solicit foreign nationals to purchase partnership interests through a sponsorship offering.  The limited liability partnership will then use the proceeds from the offering to fund your project, typically through a loan or preferred equity.

EB-5 Financing Terms:  Loans from regional centers typically carry interest rates of 4-7% and terms of 5-7 years.  Typically, the regional center will commit to provide you with an agreed upon amount of funding, contingent on the receipt of the E-B5 visas from USCIS.  Once the EB-5 visas have been granted, the lender will provide the funds to you and require collateral to guarantee repayment.

Uses of EB-5 funds:  The full amount of the E-B5 funds must be used in a job creating enterprise and should not be held in in your business or project reserves.  E-B5 funds can be used to repay a bridge loan if it’s clear in the loan documentation that the bridge loan was made in contemplation of the EB-5 financing.

If you are considering E-B5 financing for your business or project, feel free to contact us for assistance.