A direct EB-5 investment in a franchise can result in a successful investment and help create jobs and boost local economies. However, the Reform and Integrity Law has curbed interest in this type of investment due to new limitations. We tell you the details below.
An EB-5 investment in a franchise is a form of direct investment. They can be carried out by individuals, families and companies.
But the Reform and Integrity Act (RIA) has placed new limitations on direct EB-5 investments in franchises. This makes them more difficult to qualify as an EB-5 investment, which has curbed interest in this type of investment.
What is an EB-5 investment in a franchise?
An EB-5 investment in a franchise is one in which the interested party purchases or leases an established business from its current owner/operator under contractual terms that require the business to continue to operate for at least two years after the end of the case ( that is, the receipt of permanent resident status).
The purchase or rental can be financed through several methods:
- A loan secured by personal property;
- An investment in equity capital in the company;
- Some combination of the above.
The objective of the Reform and Integrity Act (RIA)
The Reform and Integrity Act (RIA) was enacted to limit abuse of the EB-5 program. The RIA has created new barriers to franchise investments, which may make it more difficult for some potential EB-5 investors to secure financing for their projects.
However, direct EB-5 investments in some franchises are still viable and should continue as before. Potential EB-5 investors should consult with an experienced EB-5 attorney who can help them navigate this complicated area of the law so they can secure funding for their projects and obtain green cards through legal channels rather than through through illegal means such as fraud or money laundering schemes.
Is it still possible to make a direct EB-5 investment in a franchise?
Yes, it is still possible to make a direct EB-5 investment in a franchise. However, you will have to meet certain requirements and go through a rigorous process that can take months or even years.
To qualify for an EB-5 visa
You must demonstrate that the investment meets at least two of these three criteria:
- Create at least 10 jobs;
- Revitalizes deteriorated areas;
- Generates more than $1 million in revenue in its first five years of operation (this requirement only applies if your business plan includes the construction or purchase of real estate).
RIA Limitations on EB-5 Franchise Investments
The Reform and Integrity Law has curbed interest in this type of investment due to the new limitations. The Law has made it more difficult to invest in a franchise, as well as to obtain visas for investors and their families.
It also makes it harder for investors to get their money back if something goes wrong with the business they invested in or they decide they don’t want it after all.
Experts recommend that immigrant investors consider different franchise options and weigh all the pros and cons before going this route.
Choosing a well-known and established franchise brand in a TEA that can produce the required number of jobs can make the EB-5 process more seamless.