This is one of the primary questions to be explored as you and your advisor undertake your due diligence in evaluating the safety of your investment and the potential of a regional center.  If the original project hits one or more roadblocks, does the center have a plan to maintain the program?  Can it still produce that all-important job creation element?

There are many reasons why a project may not proceed according to the original plan.  It is very difficult to presume all the potentials that can happen, but a good third-party advisor will know what to look for, and what to look for in a fall-back plan.  To give you an idea, suppose that the project that you have chosen is underfunded—that it fails to recruit the number of investors that were originally planned for, and so the whole project cannot proceed.  What happens then?

In this instance, your advisor will be looking to see if the regional center has a plan to pursue other funding sources, such as commercial lending.  This would enable the center to utilize your investment capital and also to secure the necessary additional funding to complete the project so that its qualification status can be maintained.  These kinds of safety-nets are even more reasons to thoroughly evaluate the center and its project.  You need assurances that the center/project has the means to secure outside funding in the event that it is needed—that a commercial lender or other investment mechanism would find the center to be a good investment risk.  This is also an example of why you need someone to dig really deep and find out who potential fund recipients will be, so that it can be determined how likely your investment is to be repaid, and to determine how fit those entities are as “collateral” for the project.

Additionally, if other sources of funding are to be secured, you need to know that your project will still continue to qualify as a basis for EB-5 immigration.  This is where things really start to get complex again, and where a solid team of professionals and consultants to back you and guide you prove invaluable.  At this point, not only are you talking about the numbers of the investment, but the legalities of investment law and visa approval; it takes a great deal of experience and knowledge in all the applicable arenas to lend the amount of confidence you need to such an undertaking.

As we said, this is only one example of the variables affecting the security of your EB-5 investment. There are many others that a third-party consultant can help you deal with.  Expect your advisor to speak frankly with you and perform this deep level of due diligence so that you can determine the safety of your investment in all respects to the extent that is prudent and reasonable.

Next we will look at: What happens to your money once invested in an EB-5 Regional Center? In the meantime, if we can answer any of your questions please contact Stephen Parnell or Andrew Bartlett at Which EB5