Investing in troubled businesses is another option for EB-5 investors who want to obtain a Green Card in the United States. These are businesses that have been operating for at least two years and have suffered significant losses in the recent past.
How to purchase an existing business to get EB-5 visa?
To qualify for the EB-5 visa, you usually need to invest in a new business that started after November 1990. But you can also buy an old business and still be eligible, as long as you create ten new jobs with your investment. There are two types of options available for EB-5 investors.
Purchase and Reorganize an Existing Business
One way to get an EB-5 visa is to purchase and reorganize an existing business in the U.S. This means that you need to buy a business that was already operating before November 1990 and change it into a new commercial enterprise (NCE). An NCE is a business that engages in lawful for-profit activity and creates or preserves at least 10 full-time jobs for U.S. workers.
However, you cannot just make a few cosmetic changes to the existing business, such as giving it a new name or a new look. You need to make significant changes that transform the nature and purpose of the business. For example, you could change a bookstore into a library, or add online services to the bookstore. These changes would qualify as a restructuring or reorganization of the existing business.
Note: This option might seem attractive because it allows you to consider more businesses than just those that were established after November 1990. However, you should also be aware that this option is not very clear or easy to implement. There is a lot of uncertainty and ambiguity about what counts as a restructuring or reorganization, and you might face some legal or practical challenges or risks along the way. You might also find it difficult or costly to transform a business into a new enterprise, compared to investing in a brand new enterprise from scratch.
Expand an Existing Business
Another way to get an EB-5 visa is to expand an existing business in the U.S. with your investment capital. This means that you need to buy a business that was already operating as a “new” commercial enterprise, which is a business that creates or preserves at least 10 full-time jobs for U.S. workers.
However, you cannot just buy the business and keep it as it is. You need to make substantial changes to the business, either by increasing its net worth or its number of employees by at least 40%. This means that you might have to create more than 10 jobs, depending on how big the business was before you bought it.
Let’s say you find a restaurant that was founded in 1986 and has 16 loyal employees. The restaurant is worth $800,000 and it’s located in a targeted employment area (TEA). You decide to invest $500,000 of your own money in the restaurant and make it bigger and better. You add a banquet hall and a catering service, which increase the value of the restaurant by 50% and create 10 new jobs.
Note: This option might seem appealing because it allows you to invest in a business that is already established and running. However, you should also be aware that this option is not very easy or straightforward. You might face some difficulties or risks in making the business grow and improve, especially if the business was not doing well before you bought it.
What does a troubled business mean?
A troubled business is a business that has been in existence for at least two years and has suffered a net loss of at least 20% in the last 12 or 24 months. Investing in a troubled business can help an EB-5 visa applicant meet the job creation or preservation requirement.
How to invest in a troubled business to get EB-5 visa?
To invest in a troubled business for the EB-5 visa, you need to meet the following requirements:
- The troubled business must have been operating for at least two years and have experienced a net loss of at least 20% in the last 12 or 24 months before you file your EB-5 petition.
- Your investment must be at least $1.8 million or $900,000 if the business is located in a Targeted Employment Area (TEA), which is a rural area or an area with high unemployment.
- Your investment must preserve or create at least 10 jobs for U.S. workers within two years of your admission to the U.S. as a conditional permanent resident. The existing jobs at the troubled business count toward this requirement, unlike in a new commercial enterprise.
What are the Benefits of Investing in a Troubled Business in getting EB-5 visa?
Investing in a troubled business can be advantageous because there may be more opportunities to find such businesses in the U.S. market, especially after the COVID-19 pandemic. Here are two of the biggest reasons why you should consider investing in a troubled business.
- Investing in a troubled business can lower the risk of failing to meet the job creation requirement for the EB-5 visa. Unlike a new commercial enterprise, which must create at least 10 new jobs, a troubled business only needs to preserve the existing jobs or create a combination of preserved and new jobs that equals at least 10. This can make it easier for the investor to demonstrate the economic impact of their investment.
- Investing in a troubled business offers the potential for higher returns if the investor can successfully turn around the business and make it profitable. The investor may also have more control and influence over the management and operations of the troubled business, compared to investing in a regional center project or a new commercial enterprise with other partners.
EB5 BRICS is available to help you with any questions related to immigration. Reach out to us through Live chat or Call Us.