Mitigating Risks in EB-5 Projects

Mitigating Risks in EB-5 Projects: Making Informed Decisions.

What if Something Goes Wrong? – A Worst Possible Scenario

AIM believes that all parties need to think about what would occur if something goes wrong and a failure were to happen at the EB-5 project/Job Creating Entity level. This is what is commonly called a “worst case scenario” so let’s look at “what if” the project/JCE were to fail for some unknown reason and what to think about ahead of time to reduce these kinds of risks.

Nothing that follows should be considered immigration, investment or legal advice.

Hopefully you have already read our thoughts on structure and focus in previous blog postings as these issues are key to what we discuss here. You will also want to read what we have written on how the USCIS views success and failure because a “failure” at the project level does not always translate to a denial of an EB-5 investor’s I-829 petition.

The principals of AIM have always believed that the job creation needed by EB-5 investors should be satisfied by construction activity job creation. There are several reasons that support this belief and chief among those beliefs is: If construction of the project/JCE is completed then the jobs needed by all EB-5 investors should be satisfied. Now couple this thought with

    • A properly capitalized project
    • A completion guarantee for the construction project
    • An obligation of the borrower that the construction spending on the project will be no less than a specific amount, which is an amount tied to the job creation needs of the EB-5 investors that make up the lender/New Commercial Enterprise.

As construction expenditures are occurring, direct, indirect and induced jobs are being created. An economic methodology such as RIMS II or IMPLAN can calculate the jobs being created based upon how much money is being spent and how that spending is taking place. This approach greatly reduces the chances of failure when it comes to approval of an EB-5 investor’s I-829 petition.

EB-5 investors that have attained Conditional Permanent Residence (CPR), that are lacking sufficient job creation, may be able associate their investment with a different New Commercial Enterprise (NCE) and either through any remaining capital from their initial investment, or through an investment of additional capital, correct the deficiency in jobs having been created and successfully attain permanent residence.

Every true investment comes with a component of risk.

The key in EB-5 is to mitigate risks, when possible, and to move them into areas that have little, to no, impact on immigration. Most target investments (the project/JCE) in EB-5 involve construction activities and then an operations phase. In most EB-5 investments you will hear about construction activity jobs and operations phase jobs. All too often an EB-5 investment will put both categories of jobs together and then try to raise EB-5 investment based upon the total number of jobs instead of just focusing upon construction activity jobs.

Remember, the more jobs the more money that can be raised, however is that the safest approach and can this approach actually increase the potential for failure?

Shouldn’t the operations phase of the business (JCE) actually operate as a business and not an immigration vehicle? If operations phase jobs are needed in order to get green cards for investors the JCE is not able to operate freely and to its utmost profitability. Staffing levels are dictated by immigration needs rather than by the demands of a business. This approach can jeopardize the immigration needs of an investor as well as the financial health of the JCE. A failure at this level could adversely impact immigration and the return of capital. The EB-5 lending to the borrower/JCE should be done in such a manner as to afford EB-5 investors the greatest likelihood for success and the least likelihood for failure. You can read elsewhere in our blog where we discuss how the focus should be upon the needs of the EB-5 investors rather than upon what is seen as best for the developer and/or the JCE.

What if there is a failure to create sufficient jobs?

The answer to this is not the same for all EB-5 investors and this has been made known by the USCIS.

Remember the following terms:

Who, is obviously the immigrant investor however when/where come into play as will be explained below?

What, is the lack of job creation as outlined above?

When/Where, are the most critical elements and both, when and where, can reflect an element of time such as “Where is the EB-5 investor in the immigration process as well as where is the EB-5 investor from a geographic perspective. The USCIS looks at having attained Conditional Permanent Residence (CPR) as the determining factor in how the EB-5 investor can possibly move forward in these circumstances. Those that have attained CPR may have a path by which they can move forward if they can correct the lack of job creation from their investment.

The USCIS is generally accepting of changes to the business plan of the EB-5 investor that would otherwise be seen as “Material Changes” if those changes occur after establishing CPR. In other words, if the EB-5 investors reaches CPR, and then there is a lack of job creation that results from their investment, the EB-5 investor may have an option to correct this deficiency and obtain permanent residence.

EB-5 Conditional Permanent Residence & Job Creation

Those that have not attained Conditional Permanent Residence (CPR) and experience a similar lack of job creation have no path forward under their current EB-5 investment. They must begin the process all over again if they wish to continue seeking US permanent residence.


Please note, in the above instances we are only speaking to the immigration aspect of the EB-5 investment. This discussion has nothing to do with the business activities of the investment as the USCIS does not measure the success or failure of the financial inner working of such an investment. The USCIS adjudication process looks at the amount invested as well as the sustainment of the investment, both as required by the EB-5 Program and the Reform and Integrity Act. However, a financial failure within the EB-5 investment does not automatically translate into a failure to obtain permanent residence.

Lacking sufficient job creation

EB-5 investors that have attained Conditional Permanent Residence (CPR), that are lacking sufficient job creation, may be able to associate their investment with a different New Commercial Enterprise (NCE) and either through any remaining capital from their initial investment, or through an investment of additional capital, correct the deficiency in job creation and successfully attain permanent residence.

The focus needs to shift to: How one remedies a lack of job creation and in a way that is most accommodating to an EB-5 investor that, through no fault of their own, has already experienced a failed EB-5 investment.

A bad situation through no fault of the EB-5 investor

This has been the focus of AIM’s principals since before the establishment of AIM as an entity!

AIM’s quest is to help individuals get out of a bad situation that was created through no fault of themselves as an EB-5 investor.

Remember, AIM does not work directly with individual investors, rather AIM consults with developers seeking capital by means of the EB-5 Program. So AIM’s efforts are focused upon specific types of projects and specific developers whereby “failed” EB-5 investors can associate a current EB-5 investment to a newly created NCE (sponsored by a regional center that is unrelated to AIM and the developer) such that the new investment of the EB-5 investor creates the greatest likelihood for bolstering any lack of job creation that may exist as well as a clear path on how capital will be returned from the project of the developer (the JCE) to the NCE in which these EB-5 investors have invested.

The USCIS has previously laid out a path by which qualified EB-5 investors, experiencing a lack of sufficient job creation, could obtain permanent residence. The Reform and Integrity Act appears to lay out this same pathway to permanent residence for those qualified EB-5 investors.

Sadly, the majority of the EB-5 industry seem to be focused upon new first time EB-5 investors, rather than paying attention to those groups of investors that have already met their obligations under the EB-5 Program with one major exception: The Job Creating Entity did not produce the jobs that were projected . These EB-5 investors are currently unable to achieve their primary motivation for investment: an unconditional green card. AIM’s desire is to remedy this issue but AIM cannot accomplish this without collaboration with the right developer, with the right project and the right regional center.

Feel free to contact us directly with any questions you may have. Our staff will be able to help you or to put you into direct contact with the parties that can.

Author Profile
Kraig Schwigen

Kraig Schwigen

Managing Member at American Investment Migration LLC

Kraig Schwigen is a recognized industry expert in the EB-5 business with over a decade of experience. As the former Chief Operating Officer of one of the largest regional center groups in the industry, Kraig grew the company from 40 investors to over 5,400, representing over $2.7 billion in EB-5 investment capital raised.

Today, as a key member of the American Investment Migration (AIM) team, Kraig is dedicated to sharing his extensive experience and expertise to assist developers seeking EB-5 investment capital.

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This website is owned and operated by American Investment Migration LLC. (AIM) - American Investment Migration LLC provides consulting services to developers seeking investment capital by way of the EB-5 program. American Investment Migration LLC is not a registered broker dealer. It is anticipated that any Securities that may be offered associated to a project in which AIM has consulted to a developer will be offered directly by the issuer or through a Broker/Dealer Member FINRA / SIPC.

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