Which Businesses Work for Standalone Direct EB‑5? Key Requirements and Examples
/in EB-5 Resources/by admin_userStandalone direct EB-5 can support small business with immigrant investment outside the regional center program. But not every business is a good fit. Making direct EB-5 work in practice requires considering the practical implications of program requirements.
Officially, direct EB-5 is open to almost any business type. The USCIS Policy Manual states that “Congress placed no restriction on the type of the business if the immigrant investor invested the required capital and directly created at least 10 jobs for U.S. workers.” (6 USCIS PM G Chapter 1(B)(1)). In practice, direct EB-5 suitability depends on investment needs, structural factors, business type, and development stage.
Key Suitability Questions for Direct EB-5 Investment
Investment Needs
- Does the business need at least $800,000 or $1.05M to launch, and can this need be supported with documentation? (If not, then the EB-5 investment would not qualify as “at risk.”)
- If the business needs more than $1M in capital, have sources been identified? (A business is allowed to have non-EB-5 investors and to require non-EB-5 startup capital, but there are additional complications and evidence requirements to consider.)
Structural Factors
- Can the job-creating enterprise admit an EB-5 investor as an equity owner? (This is a non-negotiable requirement.)
- If the EB-5 investor is primarily responsible for business development, is he or she in a position to exercise that responsibility? (Will the investor be practically able to launch and operate the business, given the investor’s current location and visa status, and likely timeline to obtain a visa through EB-5? If the EB-5 investor is not involved in developing or managing the business, can the investor be given a role in policy formation?)
- If non-EB-5 owners and managers are involved, are they willing to accommodate EB-5 requirements and evidence requests? (This practical issue has historically been a significant success factor.)
- Will the business have professional systems in place for bookkeeping, employee verification, and payroll? (Long-term, the EB-5 case can only be as strong as the documentation available to support it.)
Business Type and Development Stage
- Will the business predictably need and support at least 10 full-time employees within three years? (Predictability, employment type, employment level, and hiring schedule are all key requirements.)
- Is the business new, with no operating history and no employment prior to EB-5 investment? (If not, it still might work, but there are complications to navigate.)
- Can the business reach significant milestones prior to I-526 filing, including securing a location and completing company formation and registration steps?
- If relying on a reduced EB-5 investment amount, does the business location qualify as a TEA?
- Is the business model familiar and relatively predictable? (Can revenue and employment forecasts for the coming three years be made with fair confidence, and validated as reasonable? Do comparable companies and products exist? Can the business plan be supported with reference to industry standards, or other independent support such as contracts? USCIS can deny the EB-5 petition if it finds the business plan to be too speculative, or if actual business development ultimately differs significantly from the I-526 plan.)
Examples of business types that have successfully used direct EB-5 investment include retail establishments (convenience stores, liquor stores, gas stations), service providers (repair service, cleaning service, salon, care centers), small manufacturers (food packaging, device manufacturers, cabinet makers), warehousing and logistics companies, hospitality (hotels, restaurants), care facilities, and preschools. Less common, but occasionally successful business types include agricultural businesses (dairy farm, greenhouse), and tech companies (software developer, device developer). Franchises can be particularly suitable because they are relatively standardized and predictable (in theory), and USCIS loves standardization and predictability. Generally the more innovative the business and product, the more difficulty it will face in USCIS review.
Top reasons for project-related failure in the EB-5 context:
- The business was never able to launch at all due to insufficient capital or inability to obtain required permissions.
- The business launched, but unable to create and verify 10+ eligible full-time positions.
- The enterprise was inappropriate for EB-5 from the beginning due to pre-EB-5 business history or non-qualifying structure.
Can an enterprise have more than one direct EB-5 investor?
/in EB-5 Resources/by admin_userDirect EB-5 allowed pooled EB-5 investments prior to March 15, 2022, but not since then. Today, an enterprise seeking more than one EB-5 investor must have a regional center sponsor. Direct EB-5 only allows for one EB-5 investor per enterprise. (The direct enterprise may have other investors who are not seeking EB-5 benefits.)
To quote from the USCIS Policy Manual 6 USCIS PM G Chapter 2(C)(2):
2. Pooled Investments in Original EB-5 Program
For petitions filed before March 15, 2022, a new commercial enterprise may be used as the basis for the petitions of more than one standalone immigrant investor. For petitions filed on or after March 15, 2022, pooled investments with more than one EB-5 investor are only permitted under the regional center program.[96] For petitions filed before March 15, 2022, each standalone immigrant investor must invest the required amount of capital and each immigrant investor’s investment must result in the required number of jobs. Furthermore, the new commercial enterprise can have owners who are not immigrant investors provided that the sources of all capital invested are identified and all invested capital has been derived by lawful means.[97]
To quote from the USCIS EB-5 Questions and Answers page:
How is USCIS treating pooled standalone cases (for example, cases where multiple petitioners have invested into the same new commercial enterprise that is not associated with a regional center)?
Pooled standalone Form I-526 petitions are not allowed under the EB-5 Reform and Integrity Act of 2022 (RIA); therefore, we will reject any such petition based on a pooled, non-regional center investment filed on or after March 15, 2022.
We will adjudicate pooled standalone cases filed before March 15, 2022 (Pre-RIA), based on eligibility requirements at the time such petitions were filed.
Do all EB-5 integrity requirements apply to direct EB-5? Do direct EB-5 enterprises need to file Form I-956H or I-956K?
/in EB-5 Resources/by admin_userIntegrity requirements that involve the various I-956 forms are specific to regional centers and do not apply to direct EB-5. Direct EB-5 does not limit who can be involved in enterprise ownership and management, and I-956H need not be filed to demonstrate the bona fides of persons involved. Direct EB-5 does not limit who can be involved in investor promotion, and Form I-956K need not be filed for any promoters involved in direct EB-5 deals. There is no annual reporting requirement for direct EB-5, so direct enterprises need not file I-956G.
Fund administration requirements that apply to transactions between a regional center New Commercial Enterprise and Job-Creating Entity do not logically apply to direct EB-5, where the NCE and JCE are the same entity. However, USCIS has said that it may consider rule-making regarding fund administration in the standalone context.
Reference: USCIS response to regulations comments, Question 28 (p. 19):
USCIS has determined that INA 203(b)(5)(H) does not apply to standalone investors as the section clearly specifies that the provisions included are for “persons involved with [the] regional center program”. The provisions at INA 203(b)(5)(K) do not apply to standalone investors. USCIS may consider rulemaking to address the comment regarding the application of INA 203(b)(5)(Q) to standalone investors.
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