EB-5 Project Requirements | Can EB-5 Projects Be Guaranteed?
EB-5 Project Requirements | Can EB-5 Projects be Guaranteed?
EB-5 project requirements and EB-5 project guarantees are topics that I see the internet completely abuse time and time again. Every EB-5 investor wants to see their EB-5 project have guarantees. In exchange for cheap capital, they want low risk. MANY groups in the EB-5 world will immediately say the investment cannot be guaranteed because of USCIS. That is misleading and actually just wrong too. NOTE, having guarantees and being risk-free are two different things. USCIS requires an element of risk to qualify as an “investment”.
So, can EB-5 projects be guaranteed? The answer is YES. It is okay because having guarantees doesn’t mean that the project is risk-free. The project just needs to maintain an element of risk (No matter how large or small) that the entity offering the guarantee can theoretically not follow through on their promise… The devil is in the details.
Firstly, the important item to consider is EB-5 regulation. USCIS stipulates that the EB-5 investment must have risk. So if you have a loan style project and the developer offers a Guarantee that they will repay your funds at the end of the project, does that break the rules? It can work. It just has to be done correctly to meet the “Risk” requirement.
Why does a project have risk if the developer offers a Guarantee? The easiest way to interpret a guarantee is to view it as a “Promise”. A promise is only as good as the person making it and there is a chance that the promise won’t be kept. If someone could potentially break that promise then there is technically still an element of risk.
For example: if a huge company like General Motors (GM) offers you a corporate guarantee you might assume you have a great chance of getting your money back. That same guarantee from GM looks great if it was offered in 1989, but during the financial crisis in 2009 when it filed for Bankruptcy, the guarantee is actually worthless. It is all about the credit quality of the borrower.
So YES, a developer can offer you a corporate guarantee and it is legal because there is always a chance that the entire company goes bankrupt and the corporate guarantee won’t protect you either. The corporate guarantee can be an incredibly strong protection because it would increase the amount of security past the investment project itself and expand across the developers
Here is what you CANNOT do… A developer cannot create a Risk-Free situation. They cannot leave $900,000 or its equivalent sitting in an account promised to you in case the investment goes bust. That would be a risk free situation and USCIS will not be treating that very sympathetically.
Behring Regional Center LLC uses corporate Guarantees to secure their EB-5 investors investments. These guarantees are USCIS compliant and offer tremendous protection to investors. To learn more about EB-5 security and how attractive EB-5 investments are structured, contact us at firstname.lastname@example.org