While the coronavirus pandemic has been an unprecedented disruption to people everywhere, one opportunity it may have created for potential EB-5 investors is the opportunity to invest in a struggling business. As we’ve discussed in the past, direct EB-5 investors start their own businesses in order to meet the qualifications for an EB-5 visa. However, direct investors also have the option to invest in a “troubled business” to qualify for an EB-5 visa. As a result of the coronavirus pandemic, there are potentially thousands of struggling small businesses in America in need of investment presenting an opportunity for potential EB-5 investors.
With that in mind, here’s our overview of the requirements for EB-5 investors interested in investing in a troubled business.
What is a Troubled Business?
In order for a business to qualify as a “troubled business” under USCIS guidelines, the business must have “been [in] existence for at least two years and has incurred a net loss during the 12- or 24-month period before the priority date on the immigrant investor’s Form I-526. Furthermore, the business’ value or net worth must have depreciated by at least 20%.
How Much Do I Need to Invest?
As you probably know already, EB-5 minimum investment requirements have been dropped to $500,000 (provided the investment is in a TEA). While regional centers cannot take advantage of these lower investment requirements due to the lapse in the program’s authorization, USCIS is still accepting petitions for direct EB-5 investments. Since investing in a troubled business is considered a direct investment, you will need to invest at least $500,000 in a troubled business to meet the EB-5 requirements.
How do I meet the Job Creation Requirements?
In order to qualify for an EB-5 visa investors need to demonstrate the creation of ten (10) full time American jobs. However, job creation requirements are different for EB-5 investors investing in a troubled business. As per USCIS guidelines, “An immigrant investor who invests in a troubled business must … demonstrate that 10 jobs have been preserved, created, or some combination of the two.”
For example, if an investor’s chosen troubled business had ten employees at the time of investment, the investor would only need to demonstrate that all ten preexisting jobs had been preserved by their investment and would not need to hire any additional employees. However, if the business in question had only five employees at the time of investment, the EB-5 investor would need to create five additional full-time jobs to meet USCIS requirements.
Why Right Now is an excellent Opportunity for Investment in Troubled Businesses
One of the biggest impacts of the coronavirus pandemic was the damage done to businesses across the US. With state lockdowns and restrictions, thousands of businesses saw a drop in revenues across the country.
However, while many were able to weather the storm without closing their doors, their businesses have not yet returned to pre-pandemic profits. Although some received federal loans to help cover their losses during the pandemic, others were not so fortunate. This means that there are likely more businesses than ever that can qualify as a “troubled business” and are also in need of investment capital. Savvy EB-5 investors may be able to invest in a troubled business which is not fundamentally flawed, but was impacted negatively by the coronavirus pandemic and will likely succeed now that America is no longer restricted by mass lockdowns. Furthermore, there is the obvious benefit of acting now before USCIS or Congress acts to raise the investment requirements for EB-5 again.
While investing in a troubled business isn’t right for everyone, those that are, and act now will have a much greater variety of options for their investment than would typically be available.
Interested in the EB-5 visa? Fill out our quick free evaluation form below and find out if investing in EB-5 is right for you.