Making the Investment
The EB-5 process starts with an investor deciding upon a project that suits his or her goals and investment in that project. Investments are most commonly structured as limited partnerships where the investor makes the required investment and receives a share or shares in the partnership.
The investor must deposit the required investment amount either in the project’s operating account or escrow account, where it must be released upon petition approval – the investment must be a real one. One key legal requirement is that an EB-5 investment be considered “at risk.” That means the investment funds must actually be invested in the project and the funds must be available to be used for business purposes upon I-526 approval – most EB-5 projects make use of escrow agreement that release the funds to the project upon approval of the investor’s I-526 petition. Additionally, this means the investment project must have access to the full investment amount – an investor cannot give only a portion of the required amount (or issue a note that makes a portion payable upon a certain event).
“At risk” also means that the investment capital cannot be guaranteed. If an investment was made into a project which guaranteed the return of the funds, it would not be considered at risk and that petition denied. In any EB-5 investment, there must be the chance of a loss or the possibility of a gain. That is why project selection in EB-5 is so critical for investors – if their investment must be at risk, they would be wise to select an investment project that is as secure as possible.