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Certain types of projects tend to be more marketable than others ; however , it is usually not based upon the industry classification . An EB-5 project will generally be more marketable if the project can clearly show that the required number of jobs are expected to be created through verifiable calculations , if the operators or developers of the project have an established brand and history of financial and business success , and if the EB-5 project has a clear and compliant exit strategy .
Loan model
Loan models are particularly attractive to the foreign investor . In such a model , the new commercial enterprise ( NCE ), which is the fund LLC , is able to accept the investors ’ funds as an investment . The fund LLC will then loan the funds to the job creating entity ( JCE ) to create the required jobs . The SEC and USCIS regulations clearly state that there can be no redemption agreements or guarantee to return any part of the principal investment made to the investor . However , in a loan model the JCE can guarantee the repayment of the loan amount to the NCE . The loan can be collateralized by the assets ( land and buildings ) of the JCE ; hence , if the loan is not paid back , the NCE can bring legal action against the JCE either for the repayment of the loan or for sale of the collateralized assets to repay the loan . The NCE , owned by the investors , will now have a repaid fund , and the investors can sell their interest in the NCE at fair market value . In this instance , the project will be more marketable if the investors are in the first position for repayment of the loan .
Documented job creation
EB-5 projects will not be marketable to investors unless the project can show reasonable projections that the required number of jobs will be created , either by the business plan and / or the economic report . Along this line , the project will become even more marketable by demonstrating that more jobs than required will be created . If , at the I-829 stage , USCIS determines that not enough jobs were created , then the foreign national investor will not obtain approval to remove conditions on their permanent residency . Demonstrating that more jobs than are required will be created is a clear safety net or back up for the investor , in case of changing economic conditions .
Step one : combination of compliance and marketability
It is the primary goal of the project developers — mouse two — to obtain EB-5 investment funding for the project . However , the project developers must let themselves be guided by the brokers or intermediaries sourcing the investors — mouse three — before they receive funds . The brokers and intermediaries usually know the market for the investors they are dealing with and know what clauses need to be inserted in the EB-5 compliant documentation to make it easy to sell the project . The general conditions for marketability , as established above , are a good place to start , but brokers and intermediaries are key players in helping to determine what makes a project marketable to a specific group of investors . Brokers and intermediaries can help the players understand that , oftentimes , compliance is marketable .
Step two : funding before I-526 approval
The time delay between the filing and the approval of the investor ’ s I-526 petition is significant and consequential ; this is one major factor that has a profound effect on the financial and business viability of the EB-5 project .
Traditionally , EB-5 projects marketed to investors utilized a full escrow model , stating that investors ’ funds would be transferred to the project for use upon the approval of the I-526 petitions . Now , because of the long time delays in adjudicating I-526 petitions , it is detrimental for the EB-5 project to wait this long before using the investors ’ funds . 2
Therefore , the EB-5 project principals must again rely on the brokers and intermediaries to explain to the investors that EB-5 funds will often be used , at least in part , at the time of filing the I-526 petition , rather than at the time of I-526 approval . The investors will usually agree to allow the EB-5 project to commit their investments funds at the time of the filing of the I-526 petition if the developers and / or operators of the project have a brand name and a successful financial and business history . In addition , investors are more likely to agree to this condition if the project can clearly show that they have financial reserves committed to the project , and hence will have the financial means to quickly repay the investor if their I-526 petition is denied .
Such a release schedule has become the norm in the industry , and investors are generally agreeing to these terms . In fact , USCIS requires the EB-5 investor to have invested , or be in the process of investing , the funds at the time of filing the I-526 petition .
Step three : avoiding denials and return of funds
The three blind mice are now convinced they have an EB-5 compliant project that is also marketable to investors . That is , the professional team members believe the documentation will be approved by USCIS , the brokers and intermediaries believe that the project is marketable to investors , and the project developers believe that they will receive investments for the project . But the journey is not over yet !
In order to make the EB-5 project marketable , there is usually a stipulation that funds will be returned to the investor within a set period of time if the I-526 petition is denied . Therefore , it is paramount that the professional team , the project developers , and the brokers and intermediaries work together to ensure that the I-526 petition will be approved by USCIS .
In the EB-5 Regional Center context , the I-526 petition consists of three parts : the regional center approval documentation , the EB-5 compliant project documentation , and the authenti-
2
For a detailed discussion of escrow in EB-5 , see Evolving Escrow : Navigating Delayed USCIS Processing Times on page .
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