Question:

8 CFR 204.6(e) says a troubled business must have been in existence for at least two years, have incurred a “net loss for accounting purposes” during the 12 or 24-month period before the EB-5 petition is filed, and the loss is at least equal to 20% of business net worth. Investor must also show that the number of existing employees will be maintained for at least 2 years.

http://www.uscis.gov/portal/site/uscis/menuitem.eb1d4c2a3e5b9ac89243c6a7543f6d1a/?vgnextchannel=facb83453d4a3210VgnVCM100000b92ca60aRCRD&vgnextoid=facb83453d4a3210VgnVCM100000b92ca60aRCRD

Job Creation Requirements

Create or preserve at least 10 full-time jobs for qualifying U.S. workers within two years (or under certain circumstances, within a reasonable time after the two-year period) of the immigrant investor’s admission to the United States as a Conditional Permanent Resident.

Create or preserve either direct or indirect jobs:

Direct jobs are actual identifiable jobs for qualified employees located within the commercial enterprise into which the EB-5 investor has directly invested his or her capital.

Indirect jobs are those jobs shown to have been created collaterally or as a result of capital invested in a commercial enterprise affiliated with a regional center by an EB-5 investor. A foreign investor may only use the indirect job calculation if affiliated with a regional center.

Note: Investors may only be credited with preserving jobs in a troubled business.

A troubled business is an enterprise that has been in existence for at least two years and has incurred a net loss during the 12- or 24-month period prior to the priority date on the immigrant investor’s Form I-526. The loss for this period must be at least 20 percent of the troubled business’ net worth prior to the loss. For purposes of determining whether the troubled business has been in existence for two years, successors in interest to the troubled business will be deemed to have been in existence for the same period of time as the business they succeeded.

It is worth noting that while a troubled business creates certain favorable conditions for the EB-5 project, the company in question will likely have a more difficult time persuading investors of the viability of the investment. For this reason, if one is pursuing a troubled business as a the basis of an EB-5, one should be prepared to emphasize to investors how the troubled business presents an opportunity for additional upside or what amounts to a discounted investment opportunity (i.e. that the investor's dollars are buying more).

It is worth noting that while a troubled business creates certain favorable conditions for the EB-5 project, the company in question will likely have a more difficult time persuading investors of the viability of the investment, For this reason, if one is pursuing a troubled business as a the basis of an EB-5, one should be prepared to emphasize how the troubled business presents an opportunity for additional upside or what amounts to a discounted investment opportunity (i.e. that the investor's dollars are buying more).