Special Requirements for Direct Investment in a Troubled Business

Hello, I’m Vaughan de Kirby, and today, we’re going to talk briefly about investing in a troubled business for the purposes of EB-5

Now, there are two main requirements of the troubled business. First, it must have been in existence for 2 years, and secondly, before the filing of your EB-5 application, it must, the business, must have lost 20 percent of its value.

Now, what that means is, for example, if you have a business that had a value of $500,000.00 during the previous 2 years before filing your application, it must have lost $100,000.00 of its value. 

Now, the important thing to understand in the troubled business is you are getting credit not only for the jobs you create, but the jobs you save, the jobs you preserve.  So this means that if you had a business that had five employees, you would need to hire an additional five employees to bring it to the required ten employees

It’s also important to note that despite the troubled value of the business being decreased, you must invest the full $500,000.00 if it’s in a TEA (Target Employment Area), or $1 million if your business is located in a non-TEA.  The important part of the troubled business is you’re actually preserving jobs, and you’re getting credit for creation by preserving those jobs. 

This is a complex area of EB-5.  You should talk to your attorney and financial advisor first, before you make any investment in a business, to make certain that the business qualifies for EB-5, especially in the troubled business arena.  Thank you so much, and I hope this was helpful to you.

For more information about what qualifies when making a direct investment in a troubled business, please see the article: What Qualifies as a Troubled Business for EB-5 Purposes.