EB5 Visa Direct Investments: The Hot New Trend In Alternative Financing For Small Businesses And Regional Economic Growth

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Southern California CEO Magazine talked with leading SEC and immigration attorneys and EB5 consultants about this quick and less expensive alternative to traditional bank financing or venture capital that has the potential to fuel job growth in local cities and counties.

They’re not looking for tremendous returns, they’re just looking for legal residency through the EB5 program.

A rapidly growing number of start-up and expanding business owners are skipping traditional bank loans and venture capitalists for a faster and cheaper financing alternative, called the EB5 Visa Direct Investment program. “This direct or stand-alone program is literally on fire,” said Bernard Wolfsdorf of Wolfsdorf Immigration Law.

It connects wealthy overseas investors who want a green card with regional business owners who need money to grow and expand. Southern California CEO Magazine talked with leading Securities and immigration attorneys and investment consultants about this hot new trend at a recent EB5 Summit in Los Angeles.

The EB5 Visa Investment program was created by Congress in 1990 to stimulate U.S. economic growth by job creation through capital investment by foreign investors. An investment made by an immigrant must create at least 10 new American jobs over a period of at least two years. If successful, the investor receives their permanent green card. The U.S. Citizenship and Immigration Services sets aside up to 10,000 visas for immigrants willing to invest at least $500,000 or more to create these new jobs in American businesses.

Almost all EB5 investment has been in massive Regional Center Projects which involve hundreds of foreign investors and scores of millions of dollars. The projects have been complicated, and it has been difficult to determine how many American jobs each foreign investor has created. Many of the investors have also profited little or lost money. But, that has changed over the last year.

“More investors are finally realizing that there is opportunity with direct investment, “said Brian Su of the Artisan Business Group. Su primarily helps U.S. companies connect with cash-flush investors in China who want more control on the projects they back, but, they don’t necessarily seek as much equity in the business as a venture capitalist would likely demand.

As long as the project is very strong and the business is good, Su’s investors are willing to risk their money. “They’re not looking for tremendous returns,” Su said. “They’re just looking for legal residency through the EB5 program.”

The pool of investors has also quickly expanded from China, to include entrepreneurs from Brazil, Chile, India, Korea, South Africa and Vietnam. Up to 20% of all EB5 investment now directly benefits the little guy.

“The smaller business that’s looking to add 10 or 20 or 30 people onto their payroll, they can tap into this financing source, and the cost of doing so is less than half of the cost of big projects. So, it’s something the smaller business can afford in order to enlarge their business or start their business from a dead stop,” said Michael Michael Homeier of Homeier and Law. “It’s very exciting.”

The EB5 Visa Direct Investment program can also help small business get cash fast and with less hassle than standard bank loans or venture capital deals.

“This is the big winner,” said immigration attorney Bernard Wolfsdorf. “We’re talking two to three months. That’s how quickly the money can flow in to the job creating enterprise. You don’t have all this massive apparatus, and complicated framework. You basically put together a business plan. You outline the structure. You show where it’s going to go. You raise the money and the money starts coming in within months.”
The EB5 Visa Direct Investment program has also become powerful economic stimulus tool for Southern California cities and counties.

“Jobs create jobs,” said Kevin Wright of Wright Johnson, LLC. The EB5 program consultant said investors bring capital into a county or city. That creates more jobs, which creates more tax revenue, which creates more direct and indirect jobs, and in turn, more tax revenue. “So, it really helps to perpetuate an entire community through these investments,” Wright said.

The EB5 Visa Direct Investment program is a real opportunity for a lot of U.S. businesses and local governments to get back on their feet, said immigration attorney Michael Homeier. Businesses are struggling to get capital, and there is a huge wave of wealthy people overseas willing to put their money at risk on a U.S. business to create jobs and to get a green card. “That’s a perfect storm,” he said.

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Dwight Cromie

Bill Friedl
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