not every good project
is a good EB-5 project. 


As an experienced developer, you can identify a good project when one comes along. You look for something feasible, legal, profitable, and ethical. However, you might not realize that your good project might be a poor fit within the framework of the EB-5 immigrant investor program. A good EB-5 project focuses first on job-creating potential, a variable that is probably not part of your usual vetting checklist, and one that is not readily measurable. This article aims to provide you with some road signs on your way to a project that makes both good business sense and good EB-5 sense.


Let me begin with a brief discussion of definitions; every federal program relies heavily on semantics and EB-5 is no exception. In particular, I provide the following examples to define the three types of jobs, direct, indirect, and induced that may be created by your project. If the industry under consideration is auto manufacturing, then the direct jobs occur within the automotive industry. Indirect jobs occur within the industries that supply the inputs of production for auto manufacturing, like the steel industry, the glass manufacturing industry, and the rubber producing industry. Finally, induced jobs (by convention, grouped into indirect) are created when direct and indirect workers spend their additional earnings in the economy.


The important point is that a given project is generally tied to a given set of multipliers, and sometimes those multipliers will not yield the job-creation a developer seeks.


Economists use mathematical models to estimate job creation. All models are similar in one regard: results are dependent upon input-output “multipliers”. Multipliers are region-specific and represent the economic transactions among industry participants in terms of sales and purchases. The important point is that a given project is generally tied to a given set of multipliers, and sometimes those multipliers will not yield the job-creation a developer seeks. Thus, an otherwise good project with low regional multipliers may not be a good candidate for EB-5 financing simply because the direct and indirect job creation is low.


Let’s talk about that connection between job creation and EB-5 financing. Practitioners in EB-5 focus on one overriding goal: 10 full-time, new U.S. jobs per foreign investor. Since each investor brings $500,000 (or in rare cases $1,000,000) to the project, 10 jobs equates to $500,000. In the EB-5 context, indirect jobs are actually the most straightforward of the two job types. As long as you are working with a federally-designated Regional Center to obtain EB-5 financing, all indirect jobs resulting from your project count toward the EB-5 goal. Counting direct jobs is a little more complicated, because USCIS does not allow direct construction jobs for any project with construction lasting under 24 months.


Model-derived job creation is a mathematical exercise. Simplified, job creation is a function of the capital spent on the project multiplied by the proper regional multipliers. Having authored economic impact reports across the nation, in both urban and rural areas, I can tell you that very few multipliers will result in 10 jobs per $500,000 spent. How do projects manage to create the requisite number of jobs then? This is accomplished by adding non-EB5 capital to the stack. The blend of EB-5 capital with other capital sources is critical to the success of the project and the exact mix depends on regional multipliers (i.e. job creation).


With this understanding of job creation fundamentals, you will better understand some common pitfalls in the EB-5 industry.

  • EB-5 financing is not easy money, and you should not believe any EB-5 practitioner who tells you so. Especially dangerous are the ones who say you can definitely finance a specified percentage of your project. Every project is different, and it is the number of jobs created (and only that number) that determines the financing percentage.


  • Along that line of thinking, avoid the temptation to fully fund your project using EB-5 only. It ispossible to “force” the job-creation numbers to work, for instance, by artificially hiring more people to operate your project. In the end this just changes your good project into a bad one, and may result in a non-viable business which hurts you and the EB-5 investors. I have seen EB-5 projects that were required to maintain employees on the payroll for immigration purposes, and did so at a financial loss. Make sure that good business sense matches with good EB-5 sense.

  • Many projects, but not all, do involve an operations phase. Job creation resulting from the operations phase is typically calculated based on the project’s revenue. When estimating the jobs derived from operations, people mistakenly incorporate multiple years of revenue. This is considered “double counting” jobs by USCIS. The jobs created by ongoing operations are simply maintained in out years (EB-5 jobs have to be new jobs); the only new jobs created in out years are from incremental additional revenue.