EB-5 Investor Research Strategies

Investing in an existing business or opportunity is different from creating or starting a new business on your own. There are four primary investor research strategies to consider.

These considerations are the developer, capital stack, job creation, and an exit strategy.

Although the project is important to the investor, the credibility and experience of the developer are a crucial element. The developer you ultimately select should be well established in the field. This includes both their experience and expertise.

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One important consideration is whether or not the developer is a public firm or is private. Since the majority are private firms, the research focus should be about the experience and position the developer has within its field.

Public firms have stricter requirements, including filing quarterly and annual reports with the SEC (Securities & Exchange Commission). Moreover, these filings are a matter of public record.

Participants in the EB-5 investor program for Indians should also research what is known as the capital stack. This provides the loan to value ratio. It shows the percentage of an EB-5 loan, percentage of developer equity, and  percentage of bank and other loans involved.

Accordingly, it would show how much or little the project depends on loan funding. Seeing a higher equity portion from the developer indicates more confidence in the risk.

Having the EB-5 investment as a ‘first position’ loan, fully collateralized by the first trust deed of the project is a plus. If the capital stack includes a senior loan, the EB-5 investment would be in second position.

Moreover, having the high developer equity and first position of the loan provided combine to strengthen the investment.

JOB CREATION IN THE EB-5 BUSINESS PLAN

Job creation strategies should, ideally, be above the minimum requirements. Showing a surplus of job creation helps with the USCIS green card approval process. Ideally, these would be direct construction jobs ahead of those which depend upon eventual or ongoing business.

Having a solid exit strategy is another important element for the EB-5 visa or investor visa participant.

For a developer investment, there will be an exit strategy within their PPM (Private Placement Memorandum). Accordingly, they should ideally show that their cash flow significantly exceeds the EB-5 loan. Often an obtainable financing plan is also in place.

Consequently, strong showings from all four of these elements should form a strong Business Plan for the visa or investor visa program participant. The developer should have significant experience and expertise on the project. Solid financing from multiple sources should be in place and verified as best possible.

Resulting jobs should be directly associated with the formation of the business rather than depending upon its success. In the event that the project does not go as planned, at least one strong exit strategy should be demonstrated.