Many people are familiar with the fact that there is a pathway to a green card through investment, but surprisingly few are aware that an investor can make this investment in a startup they own. This is called an EB-5 Direct investment, also known as a “standalone investor” petition.
- EB-5 Direct Investment lets you control your own startup, actively manage operations, and directly influence job creation and project success.
- Direct investors can avoid high Regional Center administrative fees and gain more flexibility to pursue higher-return business opportunities.
- EB-5 Direct Investment is permanently authorized under the Immigration and Nationality Act, unlike the time-limited Regional Center program.
What Is an EB-5 Direct Investment (Standalone Investor)?
Standalone investors who directly invest in their own businesses make the qualifying investment of $800,000 or $1.05 million in a new commercial entity (NCE) they establish, and actively manage the deployment of this capital towards creating at least 10 U.S. jobs through commercial activity. Note that purchasing a business is not an option, as the injected capital must only be spent on investments directly connected to the creation of jobs, such as purchasing equipment, lease for business premises, and U.S. employee salary payments. Another important limitation for a standalone investor project is that each NCE can only serve as the basis of an EB-5 petition for one investor (you cannot have a 50%-50% partnership with another investor, for example, and have each investor apply for the EB-5 green card in the standalone investor petition category).
How Does a Regional Center Investment Compare?
The other, more commonly known pathway is investing in one of the “Regional Center” projects, which are large-scale projects coordinated and managed by a company that has applied and obtained Regional Center designation from USCIS. Regional Centers pool EB-5 investment from many investors and deploy capital in large-scale projects, such as real estate development projects for a hotel, resort, and the like. Regional Center projects are passive investments, so the investor does not actively participate in how the business project is managed and how the funds are deployed.
Although it is the lesser-known option, Direct EB-5 Investment offers several advantages that may make it an attractive option for certain investors.
3 Advantages of EB-5 Direct Investment Over Regional Center Projects
Advantage 1: EB-5 Direct Investment Puts You in Control
It is important to understand that no matter how much a Regional Center tries to allure investors with claims of “100% success rates,” there can never be a guaranteed return of the EB-5 investment capital. Because having funds placed “at risk” is a legal requirement for eligibility for the EB-5 green card, for all EB-5 investments it is inevitable for the investor to risk the loss of the invested capital.
This means it is a very real possibility that projects can fail, and your EB-5 investment is always subject to the possibility or partial or even total loss — even if it is a project organized by the most reputable Regional Centers (as past success does not guarantee future outcomes). Immigration lawyers know of — and many have encountered — investors who have not only lost a substantial amount of money but also had their EB-5 petitions denied because a project failed and could not create the required amount of U.S. jobs.
Risk of loss of capital is a risk that both EB-5 Direct and EB-5 Regional Center projects have in common, but the difference is where the risk is assigned. When you make your EB-5 investment in a Regional Center project, you are a passive investor, so the project’s success or failure depends on factors outside of your hands. If you invest in your own startup, you have personal control over the management of the project. If you are an investor who would rather retain personal responsibility over the business decisions that determine the success or failure of the project, a Direct EB-5 investment may be a more attractive option.
Advantage 2: Avoid High Administrative Fees and Improve Your Return
Another element that is not obvious at first glance is that Regional Center projects do charge a pretty significant administrative fee associated with coordinating and structuring these projects, amounting in the high tens of thousands, which must be paid separately and on top of the required $800,000 or $1.05 million EB-5 investment. In addition, an EB-5 investor also would pay the retainer for an immigration lawyer to help them prepare and submit the EB-5 petition. Legal fees and administrative fees cannot be counted as part of the investment, so these additional costs must be funded separately.
Another practical element common with Regional Center projects is that they may not be optimized for generating the highest return on investment, and instead be designed more conservatively to focus on increasing safety. As such, it is common for a Regional Center project investment to realize a below-market return for an investor at the end of the EB-5 process. Regional Center projects are also heavily focused on real estate development projects, which contributes to this tendency due to the nature of the industry. An investor may want the flexibility to have their capital deployed into other types of businesses that may have higher margin potential and scalability, such as software, manufacturing, or service industries. As such, if the investor seeks the option to more actively deploy capital to generate a higher return on investment, an EB-5 Direct investment would provide more flexibility and opportunity to generate that upside.
Advantage 3: EB-5 Direct Investment Is Permanently Authorized Under the INA
An important advantage of the EB-5 Direct Investment pathway is that it is permanently authorized under the Immigration and Nationality Act, whereas the Regional Center program is designed as a temporary program subject to periodic re-authorization by Congress. In fact, the current period of authorization for EB-5 Regional Center applications are scheduled to sunset on September 30, 2027, unless Congress votes to extend it. Only if an EB-5 Regional Center petitions is received before September 30, 2026 it is guaranteed to continue to be processed if Congress votes to end the program by 2027. As such, investors in Regional Center projects must be very careful about the timing of their investments and filing of their petitions.
By contrast, EB-5 Direct investors benefit from a more stable and permanent statutory framework that is authorized under the Immigration and Nationality Act. Because it is not a temporary investment framework that requires periodic re-authorization by Congress, Direct EB-5 investor petitions will continue to be adjudicated as long as the EB-5 category continues to exist under the INA.
EB-5 Direct Investment vs. Regional Center: Making an Informed Choice
Both Regional Center and Direct EB-5 investment pathways are valuable pathways to a green card, with notable differences. It is important to be fully informed of the nuances before heading into such a significant investment both financially and for your long-term immigration goals.
