Loan Model vs. Equity Model
Investing through an EB5 Regional Center is a great way to obtain lawful permanent residency (green card) while contributing to the continued economic development of the United States. Investors seeking a green card for themselves and their immediate families in the US can invest between a min. of $500,000 in an EB5 regional center in any number of cities across the United States. The EB-5 visa program was created in 1990 under section 203(b)(5) of the Immigration and Nationality Act (INA). The program allows for qualified non-US citizens foreign investors to seek permanent resident status on the basis of an investment in the US economy. EB5 Regional Center projects include hotel and residential development, vineyards, agricultural and mixed use projects, alternate energy plants, hospitals and other commercial real estate development. EB5 Regional centers are certified by USCIS in advance of accepting investor funds and investor funds are held in an escrow account until the green card application is approved. The process takes less than a year and thousands have benefited already from this unique program. Depending upon the investment model used, investors typically receive a small return usually in the form of interest payments over the life of the investment as further incentive although there are no guarantees.
There are two models of approach for the potential investor to consider. The equity vs. loan model. In the loan model scenario, the investor purchases equity in a pooled investment vehicle and the pooled investment vehicle loans the proceeds to the project company. Put another way, the investor makes an equity investment in a limited partnership created by the Regional Center, which then in turn makes a loan to the EB-5 project.
In the equity model, the individual investor takes an equity position in the project itself. This is what an individual investor who makes an EB-5 investment into his or her own project in a so-called “direct EB-5” [no Regional Center involvement] does. The EB5 regulations however require the full investment amount to be “at risk”. Thus, if the equity investment guarantees a certain return to the investor, for example, it violates this rule.
Whether one chooses the equity or loan model approach is strictly a matter of investor preference.
For more information, to learn about specific projects currently seeking investors or to get started, contact ustoday.