There is a great deal of all kinds of information on the Internet about getting a green card by investing. These are the EB-5 programs. You can find a lot of information about this program through Google. It all seems easy and straightforward: invest money through a US government program, receive a green card. Any questions?

Moreover, if we invest in “target areas of the USA”, it is enough to invest just US$ 500,000. Things seem even easier and more straightforward.

We only have one question. Have you really decided to lose all this money? And WITHOUT any guarantee that you will receive the sought-after green card?

We have decided to focus on a few nuances that no one writes about. Pity. Such reticence puts a big fat X across 99% of such programs because problems pop up that you, even without any experience of working in the US, will have no trouble reading between the lines.

1. Getting an ЕВ-5 visa by participating in a target area development program

What is a target development area?

Target development areas are rural areas with populations under 20,000 as well as areas where the unemployment rate is 1.5 times or more above the national average.

Why did the US government become so “nice” all of a sudden and started giving out green cards at a 50% discount? In practice this means that you are being asked to invest $500,000 in backward rural areas where, for all practical purposes, nobody lives. Young people do their utmost to get away from there. And the poverty among the population is such that President Clinton was forced to adopt a special anti-poverty (!) program for these poorly developed areas of the US.

Why is it that they are so poor? Very simple - these are just dying towns and settlements far from civilization. You’re going to laugh, but even the Internet is very hard to find over there. America is very different from place to place. Obviously, no American in his right mind will invest anything in these areas. And, by the way, they don’t. There is no skilled labor to be found. And the still remaining (for now) agricultural farms and companies are in a hopeless crisis situation on the verge of ruin because there is NO WAY they can compete with large farms and companies from rich areas and certainly not the advanced Mexican farms. And they will never be able to. No matter how much money you invest. Would you like to start a business in an area like that?

Come have a look for yourself. You will NOT LIKE IT there.

2. How high is the risk of losing the money invested in a development project in one of the target areas?

The law defines any investment activities as risky: this means that taking part in an investment project in a target development area, you run a risk of losing the money invested in the project.

As they say in America, “oops…”. In other words, if you want to invest you money - be our guest, but no one is offering any guarantees… OK, let’s say that you are so rich that half a million dollars doesn’t matter much to you, and you are even prepared to lose them for the sake of the green card. But let us read further:

3. ЕВ-5 program participation requirements

The investor must invest capital:

• in creating a new business,
• in purchasing an existing one, so that, as a result, the value of its assets or the number of employees would increase by 140%,
• or invest funds into a an unprofitable business, which has lost 20% of its net asset value within the last 2 years, however no jobs at this company may be cut;
• the investment amount must be at least US$ 1,000,000 (US$ 500,000 in target areas);
• as a result of this investment activity, at least 10 full-time jobs must be created for American employees (citizens or permanent resident);

What it works out to is that after buying a completely hopeless business that barely makes its ends meet, you have to hire 40% more people, which, considering the cost of labor in the US, is guaranteed to make the business a losing proposition. You could, of course, invest an additional $200,000 (40%), but you would still have to pay the salaries.

And while the company is already losing money, you still, practically speaking, cannot fire a single employee, not even the one who caused the company to become a losing business in the first place. And even if you do fire him, you will have to shell out a large amount for his severance pay and immediately hire a replacement so that the number of employees would not be reduced (otherwise you can say good-bye to your green card!). In other words, in addition to the initial investment, you will have to continue investing in this obviously losing business. If you really want to be a patron - help the children.

And, finally, the most interesting part.

4. ЕВ-5 program restrictions:

• Requires large investment.
• Obliges you to submit a detailed business plan for company development.
• Sets a minimum requirement for the number of jobs at the newly created or restructured company.
• When the investment capital is being invested in an existing money-losing business, the number of jobs must not be reduced.
• Initially the investor and the members of his family receive a conditional permanent resident status in the US, and the company must prove itself viable.
• After 2 years the USCIS will conduct an inspection in order to verify whether the mandatory conditions of the program have been met. If the above conditions have not been met, the investor and his family may be denied a waiver of conditionality of their status.

There’s the noose on the investor’s neck. During the 2 years of running a money-losing business you may not fire a single employee and, in addition, you have to feed this entire “working collective” out of your own pocket for at least 2 years, which means that your expenses will increase by at least another 25-30%. That’s approximately the kind of conditions you are being invited into under the target development areas program. Welcome! And if the conditions are not met, it’s good-bye green card (and the money too).

The saddest thing about investing in such areas is their utter lack of any prospects whatsoever. By the way, here’s an interesting detail:

For the purposes of the program, 10,000 visas in this category are being issued every year, and 5,000 visas are reserved for persons investing in target development areas approved by the US Citizenship and Immigration Service.

Since 1990, the US has been allocating 5,000 special-purpose green cards for this program. But never in the 17 years of this program’s existence has the 5,000 green cards quota been fully used. In some years, not even half-way. Why would that be?

To cut the long story, investing in “target areas” you immediately put yourself in a no-win situation. No way to develop the business, nowhere to find normal people. You cannot move it somewhere else. Is that what you want?

Compared to Russian geographic counterparts, the area that these territories bring to mind is Franz Joseph Land. Sounds good - but crushingly depressing.

So what’s to be done?

Actually, things are not as bad as they might seem. The nice thing about working (and living) in the USA is that the laws here are made for the people.

1. Certainly, one should forget about the “target areas”. This is clear. You will lose your money and still never get your green card.
2. Do not get involved in businesses you know nothing about. Do not buy wineries or invest in real estate that is dropping like a stone today (in the US, this is called a “market correction”)…
3. You should only work in highly developed parts of the US. A business can only prosper in areas where there is money, clients and highly qualified specialists. We, for instance, prefer to work in Northern California, in the Bay Area (San Francisco, San Jose, Oakland), in the Silicon Valley (the world’s largest technological park), and in Las Vegas, Nevada.
4. It is best not to manage a business personally, but to hire an efficient management company. The old management should continue in the company for at least 3 - 6 months in order to hand over the company’s affairs to the new management. A very good option is to become a minority partner in a company that intends to spend your investment on expanding a successful business. You will make your money back plus an annual profit. Let us remind you that your rights are protected by US law. Moscow’s Basmanny District Court does not have a single counterpart in the United States.
5. Never try to start managing the company personally right away or to introduce the “Russian business model” in the US. This would mean certain failure. Only an American-style business is possible in the US. Spend the first year (at least) on learning your business and the rules of doing business in the US. Trust me, the thinking and behavior of people living in another hemisphere are somewhat different from your own. If you have any doubts, compare the Russian and American histories of the past 200 years.
6. It is better to buy a company. You could, of course, open a company and start building things from the ground up, but in the end this will prove more expensive.
7. To find and buy a company that would be fully in compliance with the EB-5 program requirements is a very complicated matter that requires experience and qualifications. Of all the companies offered for sale, less than 1% meets this program’s requirements. They do not give green cards for “investments in real estate” in the US З. For example, the “fresh option” - to buy or build a multi-unit residential building and rent out the apartments - does not qualify for the EB-5 program. (Otherwise, they would have had to issue platinum green cards to all the Arab sheiks…) And, by the way, franchises do not qualify for the EB-5 program either. That is, you could by a franchise to open a McDonald’s, but don’t count on a green card.
8. In the US, a company that employs more than 10 people is already a serious business. And if this company is profitable, it will definitely be worth more than a million dollars. What this means is that, for you, it would make most sense to buy a somewhat unprofitable company (which can be many times cheaper), as long as you are well aware of all its shortcomings and problems, and as long as you (and your management team) know how fix them in a short enough time (within 3 - 6 months).
9. When buying a company, ALWAYS do a complete due diligence and an audit, no matter how attractive the offer might look to you. Even if you are buying the company from friends or relatives. They might not be aware of many things themselves, as it turns out later on…
10. When buying a company, remember that the amount for which you are buying out the company is your primary investment. Working capital, investment in upgrading the equipment, in marketing and sales will have to be made separately. The ideal option would be for you to visit the US personally so you could see everything with your own eyes and meet everyone.

If you invest correctly, you will get everything that you want, and more.

• Green cards for all family members (and after 5 years - US citizenship)
• A permanent source of income, totally independent from Russia (Ukraine, Belarus, Kazakhstan), which the company provides for you and which will serve as a certain guarantee for you and your family
• Growth of your capital investment and its liquidity
• The priceless experience of working in the US, which you will be able to apply in other companies.

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