A Substantial Investment in an E2 Business Plan
An E2 business plan is an essential component of the visa application because it demonstrates, among other things, the project meets the requirements that validate a qualified E2 investment:
- Investment
- Substantial Investment
- Marginal Enterprise
- Bona Fide Enterprise
Our E-2 visa immigration business plans effectively validate your investment according to current requirements.
Validation of an investment that is legal, viable and substantial is an integral part of the E-2 application.
In This Post
Investment, 8 CFR 214.2(e)(12)
Substantial Amount of Capital, 8 CFR 214.2(e)(14)
Proportionality Test
Marginal Enterprise, 8 CFR 214.2(e)(15)
Bona Fide Enterprise, 8 CFR 214.2(e)(13)
What Are the Adjudicator Guidelines?
Items to Validate in a Compliant E2 Business Plan
Investment, 8 CFR 214.2(e)(12)
An investment is the treaty investor's placing of capital, including funds and other assets (which have not been obtained, directly or indirectly, through criminal activity), at risk in the commercial sense with the objective of generating a profit. The treaty investor must be in possession of and have control over the capital invested or being invested. The capital must be subject to partial or total loss if investment fortunes reverse. Such investment capital must be the investor's unsecured personal business capital or capital secured by personal assets. Capital in the process of being invested or that has been invested must be irrevocably committed to the enterprise. The alien has the burden of establishing such irrevocable commitment. The alien may use any legal mechanism available, such as the placement of invested funds in escrow pending admission in, or approval of, E classification, that would not only irrevocably commit funds to the enterprise, but might also extend personal liability protection to the treaty investor in the event the application for E classification is denied.
Investment in the E2 Business Plan
Investment in the enterprise is established in the E2 Business Plan by several means. The source and amount of the invested funds are put in a table that states the amount; and this is validated by inclusion of images of the actual investment. The latter shows clearly the path of the invested funds and where they are presently. The importance of showing where the funds are at the time of application is that it can help demonstrate that the petitioner has irrevocably committed those funds to the project. As long as it is clear that the investor has committed unsecured funds or personal assets, the risk of loss is established.
While showing the funds in escrow is an option, the petitioner may have already started to use the funds so the path of funds through a bank account is also acceptable. The investor's intention to operate profitably is demonstrated in the business plan's five-year financials and the validation of a local market that will support the new enterprise.
Matter of Walsh and Pollard
This decision followed the Department of State’s guidelines on E-2 visa classification. The most important part related to this discussion is that when applying the substantiality test, one must focus on the nature of the business. Thus, as in this case, sometimes an investment of only a small amount of money might meet the requirement. This download contains the full text of the Matter of Walsh and Pollard decision.
What Is A Substantial Investment?
Substantial Amount of Capital, 8 CFR 214.2(e)(14)
A substantial amount of capital constitutes an amount which is:
(i) Substantial in relationship to the total cost of either purchasing an established enterprise or creating the type of enterprise under consideration;
(ii) Sufficient to ensure the treaty investor's financial commitment to the successful operation of the enterprise; and
(iii) Of a magnitude to support the likelihood that the treaty investor will successfully develop and direct the enterprise. Generally, the lower the cost of the enterprise, the higher, proportionately, the investment must be to be considered a substantial amount of capital.
The definition of a substantial investment is well-established: It is the interpretation of it that varies depending on the interpreter.
The fact that there are no absolute guidelines means that the question, How much is enough?, is a difficult one to answer for the E2 application.
Some applicants and immigration attorneys have said that they received approvals for petitioners who were investing no more than $10,000. While that might satisfy the proportionality test in some instances, it is unlikely that it will be considered a substantial investment as a matter of course.
An investment validated in an E2 Business Plan on the basis of the proportionality test at least has the advantage of using the same interpretation of substantial investment that is used by adjudicators. That is why we use it as one of our validation methods.
Proportionality Test
What Is the Proportionality Test?
Under the Matter of Walsh and Pollard, 20 I. & N. Dec. 60, 63 (BIA 1988), the Board of Immigration Appeals (BIA) held that substantial investment of $15,000 was sufficient for the business that the investors sought to start. Arguably, this precedent decision was the origin of the proportionality test, which is described in the section.
The proportionality test determines whether an investment is substantial by weighing the amount of qualifying funds invested against the cost of the business. If the two figures are the same, then the investor has invested 100 percent of the needed funds in the business; such an investment is substantial. Most cases involve lesser percentages. The proportionality test can best be understood as a sort of inverted sliding scale. The lower the cost of the business the higher a percentage of investment is required. On the other hand, a highly expensive business would require a lower percentage of qualifying investment. There are no bright line percentages that exist for an investment to be considered substantial. Thus, investments constituting 100 percent of the total cost would normally qualify for a business requiring a startup cost of $100,000, for example. At the other extreme, an investment of $10 million in a $100 million business may be considered substantial, based on the sheer magnitude of the investment itself.
(1) See 9 FAM 402.9-6(B) for guidance regarding qualifying funds.
(2) The cost of an established business is generally its purchase price, which is normally considered to be the fair market value.
(3) The cost of a newly created business is the actual cost needed to establish such a business to the point of being operational. The actual cost can usually be determined by combining the cost of the assets the investor has already purchased with the cost estimates for the procurement of additional assets needed to run the business. For example, cost may be established through invoices or contracts for substantial purchases of equipment and inventory; appraisals of the market value of land, buildings, equipment, and machinery; accounting audits; and records submissions to various governmental authorities.
(4) The value (cost) of the business is clearly dependent on the nature of the enterprise. Any manufacturing business, such as an automobile manufacturer, might easily cost many millions of dollars to either purchase or establish and operate the business. At the extreme opposite pole, the cost to purchase an ongoing commercial enterprise or to establish a service business, such as a consulting firm, may be relatively low. If all the other requirements for E-2 status are met (see 9 FAM 402.9-6), the cost of the business per se is not independently relevant or determinative of qualification for E-2 status.
Is the Enterprise Marginal?
There are various ways to show that the business is more than marginal, in the sense of only providing a livelihood for the applicant. If the business does not yet generate sufficient income necessary to support the applicant and family, then one can look to the economic impact of the business. The enterprise must have the present or future capacity to generate more than a minimal living for the investor and family in order to make a significant economic contribution.
Marginal Enterprise, 8 CFR 214.2(e)(15)
A marginal enterprise is an enterprise that does not have the present or future capacity to generate more than enough income to provide a minimal living for the treaty investor and his or her family. An enterprise that does not have the capacity to generate such income, but that has a present or future capacity to make a significant economic contribution is not a marginal enterprise. The projected future income-generating capacity should generally be realizable within 5 years from the date the alien commences the normal business activity of the enterprise.
Bona Fide Enterprise, 8 CFR 214.2(e)(13)
The enterprise must be a real, active, and operating commercial or entrepreneurial undertaking which produces services or goods for profit. The enterprise must meet applicable legal requirements for doing business in the particular jurisdiction in the United States.
Bona Fide Enterprise
A treaty investor is required to establish that the investment enterprise is a real, active, and operating commercial or entrepreneurial undertaking which produces services or goods for profit. The enterprise is required to meet applicable legal requirements for doing business in the particular jurisdiction in the United States.
Items to Validate in a Compliant E2 Business Plan
Our E2 Business Plans, like ones created by other vendors in this space, contain the requisite sections from the Executive Summary to the Five-Year Financials. It is at that point that the similarity ends.
Listed below is a point-by-point analysis of some of the ways in which we validate specifically the E2 investment requirements in each plan. Several of these methods are proprietary and are recognized as such by the USCIS. Do not be misled by our reasonable pricing (see below): Our plans are the most compliant and reasonable--an absolute requirement for acceptance--of those offered.
Substantial Investment
Validation: When we create E2 business plans, we face the same questions about validating the investment as the adjudicators face in evaluating it. Our job is to establish that the investment meets the litmus test(s) for substantiality. The basis for our validation is the business and the investment amount. The proportionality test is central to this validation but accommodates other ways of looking at the investment. In theory, the lower the cost of the enterprise, the higher, proportionately, the investment should be to fulfill this requirement.
Means: A section on what the substantiality is for the investment and the basis for determining substantiality. This is a separate section based on our proprietary format.
Marginal Enterprise
Validation: This, like substantial investment, can be a gray area that is difficult to validate. While the usual standard for determining whether or not a business is marginal is its capacity to generate revenue. But there are mitigating circumstances. The impact of your business on the community is also factored into this evaluation.
Means: Economic impact, five-year financial projections, industry standard revenue, COVID and post-COVID analysis.
Bona Fide Enterprise
Validation: No one wants to assume that funds set aside for investment would be used otherwise. Nonetheless, the burden of proof rests with the investor to show that their business exists, that it is not a concept, a shadow or a shell.
Means: Standard documents such as leases, articles of incorporation, state or local business licenses, etc., are all used to validate the Company's existence.
Investment Impact
Validation: While we could attempt to validate your investment in the context of the national economy, usually this would represent an impact so small as to be statistically insignificant. Unless your enterprise is a multimillion dollar one with a broad target market, it is unlikely that it will have a national impact. It will, however, have a local impact on the community. You are providing jobs, enabling increased spending, expanding the tax base, etc. We validate this very carefully and present every impact that your business represents. This validation has become an unwritten requirement for E2 Business Plans and we have a proprietary method for demonstrating the economic impact of your investment.
Means: Demographic profiles, consumer spending, tax base analysis, increase in local GDP, increase in hiring.
COVID and Post-COVID Analysis:
Validation: The pandemic has had a profound and undeniable impact on our economy. It has also resulted in a paradigm shift in the way we work and live. To ignore it would result in an analysis that might not be reasonable. One of our clients, for example, had a business whose operating structure that would involve both remote and in-office employees as well as client interactions that were atypical. We laid out very carefully why the operation had been designed that way. This affected their financial projections, too. The approach was thorough and reasonable, accepted by the USCIS.
Means: Five-year financials, analysis of business structure, staffing, market validation, etc.
What Are the Adjudicator Guidelines?
9 FAM 402.9
TREATY TRADERS, INVESTORS, AND SPECIALTY OCCUPATIONS - E VISAS
(CT:VISA-1338; 08-10-2021)
(Office of Origin: CA/VO)
This is a noninclusive list of guidelines regarding E-2 applications. They are described here because they should be part of the due diligence for every E2 Business Plan. To avoid confusion, you has been changed to adjudicator in the narrative since you refers to the adjudicator in the original document.
The purpose of the requirement is to ensure to a reasonable extent that the business invested in is not speculative but is, or soon will be, a successful enterprise. The rules regarding the amount of funds committed to the commercial enterprise and the character of the funds, primarily personal or loans based on personal collateral, are intended to weed out risky undertakings and ensure that the investor is unquestionably committed to the success of the business. Consequently, the adjudicator must view the proportionate amount of funds invested, as evidenced by the proportionality test, considering the nature of the business and the projected success of the business.
Interpretations of “Substantial”: No set dollar figure constitutes a minimum amount of investment to be considered "substantial" for E-2 visa purposes. Investment of a substantial amount of capital for E-2 visa purposes constitutes an amount that is:
- Substantial in a proportional sense, as determined through the application of the proportionality test;
- Sufficient to ensure the treaty investor's financial commitment to the successful operation of the enterprise; and
- Of a magnitude to support the likelihood that the treaty investor will successfully develop and direct the enterprise.
Investor's Commitment: The adjudicator may request whatever documentation is needed to properly assess the nature and extent of commitment to a business venture. Such evidence may include letters from chambers of commerce or statistics from trade associations. Unverified and unaudited financial statements based exclusively on information supplied by an applicant normally are insufficient to establish the nature and status of an enterprise.
Enterprise Must Be More Than Marginal: A marginal enterprise is an enterprise that does not have the present or future capacity to generate enough income to provide more than a minimal living for the treaty investor and his or her family. An enterprise that does not have the capacity to generate such income but that has a present or future capacity to make a significant economic contribution is not a marginal enterprise. The projected future capacity should generally be realizable within five years from the date the applicant commences normal business activity of the enterprise.
Commercial Enterprise Must Be Real and Active: The enterprise must be a real and active commercial or entrepreneurial undertaking, producing some service or commodity. If the investment relates to a new enterprise, then the adjudicator must be convinced that it will be a real and active commercial or entrepreneurial undertaking that will produce some service or commodity if the visa is issued. It cannot be a paper organization or an idle speculative investment held for potential appreciation in value, such as undeveloped land or stocks held by an investor without the intent to direct the enterprise. The investment must be a commercial enterprise; thus it must be for profit, eliminating non-profit organizations from consideration.
Source, Possession, and Control of Funds: The source of the investment may include capital assets or funds from savings, gifts, inheritance, contest winnings, loans collateralized by the applicant’s own personal assets (see paragraph c below) or other legitimate sources. The source of the funds need not be outside the United States. The source of the investment must not, however, be the result of illicit activities. The adjudicator may request whatever documentation is needed to properly assess the source of the funds. The applicant must demonstrate possession and control of the invested capital assets and funds. Inheritance of a business itself does not constitute an investment.
Investment Connotes Risk: The concept of investment connotes the placing of funds or other capital assets at risk, in the commercial sense, in the hope of generating a financial return. E-2 investor status must not, therefore, be extended to non-profit organizations. See 9 FAM 402.9-6(D). If the funds are not subject to partial or total loss if business fortunes reverse, then it is not an “investment” in the sense intended by INA 101(a)(15)(E)(ii). If the funds’ availability arises from indebtedness, these criteria must be followed:
- Indebtedness such as mortgage debt or commercial loans secured by the assets of the enterprise cannot count toward the investment, as there is no requisite element of risk. For example, if the business in which the applicant is investing is used as collateral, funds from the resulting loan or mortgage are not at risk, even if some personal assets are also used as collateral.
- Only indebtedness collateralized by the applicant’s own personal assets, such as a second mortgage on a home or unsecured loan, such as a loan on the applicant’s personal signature may be included, since the applicant risks the funds in the event of business failure.
Funds Must be Irrevocably Committed: To be “in the process of investing” for E-2 purposes, the funds or assets to be invested must be committed to the investment, and the commitment must be real and irrevocable. The purchase of a business that is conditioned upon the issuance of the E-2 visa may still qualify as an irrevocable investment. Despite the condition, the purchase would constitute a solid commitment if the assets to be used are held in escrow for release or transfer once the condition is met. The point of the example is that to be in the process of investing the investor must have entered into an agreement and have committed funds.
Why Work With Us?
Our work is due diligent and well-accepted by the USCIS. We create reasonable E2 Business Plans that are among the best immigration business plans. They also represent you, your investment and your business as vital entrants into the United States economy. Our pricing is reasonable and begins at $1,300 prepaid.
If you have received an E2 Business Plan RFE, get in touch with us: We are RFE experts.
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