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✓ Required Licenses and Permits: Operating a business means addressing all required permits and licenses. Federal and state licenses are generally required of businesses that fall under categories important to the general public, or those that provide professional services vital to the public welfare. Local licenses usually fall under the category of occupational licenses or business taxes, and possibly sanitation or similar permitting for specific businesses.
✓ Timetable for Hiring: The EB-5 program requires the new business to create a minimum of 10 new full-time jobs for a period of two years and / or to save 10 jobs that would have otherwise been eliminated. A compliant business plan needs to demonstrate that each investment will create 10 jobs through a detailed staffing plan, including a clear timetable for employee hiring, ideally in the narrative and visually.
✓ Job Descriptions: Job descriptions are an essential part of any business organization and an important element of a business plan. Job descriptions ensure that USCIS understands the jobs that will be created by the business, and the roles and responsibilities of each job. They should be practical, clear, and accurate, and directly correlate to the project.
✓ Budget and Financial Projections: The business plan must be well-documented with financial projections including sales, costs, budgets, and income over a period of five years. The budget must also show the basis and assumptions for these projections. It must show the source of funds to start up, support, and maintain the business, as well as detailing the uses of funds raised from investors. All financial projections must be based upon generally accepted accounting principles and reasonable business models.
As the most critical piece of the EB-5 puzzle, the business plan process can be overwhelming. The key is that you don’ t have to know everything— you just have to know enough about the process to understand it and then hire experts to develop your business plan, preferably a trusted authority with the education, experience, and expertise to deliver success.
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The plan also should discuss the capitalization for the hotel along with the status of the other parts of the financing and when they will enter the project. The construction budget used to calculate the construction jobs must be in the business plan, and inputs for the economic model must always be laid out in the business plan. A detailed multi-year financial pro forma must be in the business plan, along with a complete discussion of the calculations for RevPar, average daily rate( ADR), and the occupancy rate. The plan also should cite the source of these calculations and any financial assumptions.
Additionally, business plans must clearly discuss the hotel brand and the material agreements in place for the hotel brand and management. It is best if both the franchise and management agreements are executed prior to filing any EB-5 petitions. If they are not, the business plan should discuss the timelines for executing the franchise and management agreements and letters of intent with the franchisor, and the manager should be included with the EB-5 petitions.
The Economic Report
The economic report is a primary document for any EB-5 case through a regional center, as it calculates the number of jobs that will be created by the project. Most EB-5 petitions for hotels will create jobs through construction and then operations.
Construction jobs are relatively easy to calculate using the EB-5 eligible hard costs( less contingencies) plus the EB-5 eligible soft costs( engineering, architectural and legal). Operations jobs for the project are usually calculated using hotel revenues. The revenues for this purpose are taken from the hotel’ s pro forma found in the Matter of Ho business plan. For the purpose of developing revenues for the business plan and the economic report, revenues are usually calculated by RevPar— revenue per available room. RevPar is calculated by multiplying the hotel’ s average daily room rate( ADR) by the hotel’ s occupancy rate. The ADR and the hotel’ s occupancy rate always must be found in the Matter of Ho compliant business plan.
A common issue arises from the use of operations jobs resulting from the restaurants, bars, and nightclubs operating at the hotel or resort if the hotel does not own and operate those establishments. USCIS may view these as“ tenant” jobs and apply the February 2012 Tenant Occupancy Guidance to those jobs. However, if the hotel or resort is the owner and operator of the restaurant, bar, or nightclub, those jobs can be included in the overall operations jobs calculation.
Another hot issue in hotel economic reports is whether the operations jobs can be counted at all if the construction timeline is protracted. USCIS has imposed an arbitrary rule that jobs must be created within two and a half years of the I-526 petition approval per the December 2009 Neufeld EB-5 Memorandum. While this is not law, it is an adjudicatory standard used by USCIS in the EB-5 adjudication process. Depending on when the construction of the hotel starts and how long the construction takes for the hotel, the timeline must be examined to see if operations jobs can be used at all. For example, if construction will not start until the EB-5 money comes into the project, and construction will take 30 months, then the economic report may
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