The Forgotten Part of the EB-5 Program

The EB-5 fifth-preference, investment visa program sponsored by the U.S. government garners a lot of press – especially from reporters and commenters who have failed to study the program in enough detail to understand its purpose and its actual success.

 

Most of the fracas begun by misinformed media outlets happens when some scoundrel uses a promise of a major development program to defraud others. This typically occurs within the scope of the Regional Center aspect of EB-5. There is such an abundance of reporting on the aggregation of funds through the Regional Center program that the original concept of Direct Investments has been nearly forgotten. That is unfortunate because Direct Investors are less susceptible to fraud because they typically have some skin in the game and some control over the operations of the business in which they have invested.

The much safer Direct Investment gets overlooked as those who provide personal and commercial services hope to realize a much greater revenue stream from a large group of investors. That aggregation can set the stage for greed to become an irresistible temptation.

From the investor side, Direct Investments tend to, as a whole, provide an ROI that is significantly higher than that gained through projects linked to Regional Centers. Globest.com pointed out recently that Direct Investments “offer easy exit strategies” versus Regional Center projects have “TERRIBLE exit strategies.” A fundamental rule of any business transaction is to have an exit strategy at the beginning.

Also, the processing time for Direct Investors is typically simpler and shorter, moving the investor more expeditiously toward his or her primary goal of gaining a Green Card.

How is it that the cornerstone of the EB-5 program has become the forgotten stepchild?

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