Investing in TEA Regions vs. Purchasing an Existing Business: Which is the Cheaper EB-5 Pathway?

If you are looking to invest in a new business to expedite your EB-5 Visa application, you probably have many questions. For example, is there a difference between investing in a TEA region and buying an existing business? There are pros and cons to each strategy.

This article will discuss the differences between TEA Regions vs. purchasing an existing business for EB5 investment.

EB-5 And The Reform and Integrity Act of 2022

One of the most talked-about reforms within the EB-5 community is the introduction of a new and improved EB-5 Reform and Integrity Act which the U.S president signed into law on March 15, 2022. 

One of the most notable changes of the act is the upward review of the minimum investment amounts to $800,000 for rural or high unemployment areas and $1,050,000 for new commercial enterprises. 

What The New Rules Mean For New Investors

If you’re an investor bursting with attractive real estate investment ideas and looking to get your green card through the EB-5 program, you’ve probably been pretty nervous about what all these changes mean for your future. 

Since our focus is on which EB-5 pathway will save you the most in unnecessary costs, let’s take a quick look at what each one looks like in numbers.

EB-5 Pathway 1 – Investing in TEA Regions

If you are planning to invest in a TEA region, it is vital that you understand the legal requirements for EB-5 investors. Greenhorn investors following this pathway generally partner with consulting firms like the EB5 Affiliate Network to find qualifying EB-5 investor programs to invest in for full legal and financial compliance. 

To get a green card under the EB-5 program via this route, you must invest at least $800,000 in a high unemployment area (or “targeted employment area,” or TEA). In addition, if you are investing in a TEA region, you must also show that the investment will benefit rural areas.

The TEA designation is based on unemployment rates, per capita income, and poverty rates. There are currently over 1,000 TEAs nationwide, so there are plenty of options to choose from if you know where to look.

However, the good news is that investors can presently invest at least $500,000 into the business or be able to demonstrate that they own or will own 25% or more of the company after purchasing it. The only requirement is that you must make such investment into a new commercial enterprise, targeted employment area, or new entity.

EB-5 Pathway 2 – Purchasing An Existing Business

The EB-5 visa also has a special provision that allows investors to obtain a green card if they buy a company that has been in existence for at least two years. 

This option is called an “investment-based” visa, and it allows an investor to apply for permanent residency without having first become a resident of the United States. However, despite its advantages, this pathway comes at a pretty steep price despite its advantages.

The first reason is that the applicant must have sufficient capital to buy the business. For example, the applicant must have $1 million in liquid assets or be able to provide a letter of credit from a bank that shows that they have this amount of money. 

Another reason why purchasing an existing business for the EB-5 visa pathway is complex is that the business must be proven profitable. 

Secondly, if the business you wish to invest in does not fall within the TEA Definition, the investor is most likely required to create ten “direct, permanent and full-time” jobs or invest a minimum of $500,000 per job. Under these circumstances, purchasing an existing business is often more expensive than investing in a TEA region.

Final Verdict

If you’re planning to invest in a commercial enterprise to secure an EB-5 visa to come to the United States, consider first investing in a TEA region. Investing in distressed or underdeveloped regions of the country, designated as TEA zones, will be a better use of your time and money than simply purchasing an existing business. 

A foreign investor can receive a green card for this, which is undoubtedly a lot more appealing than putting in three years’ worth of sweat equity.