What does Matter of Ho-compliant mean?
July 26, 2013 3 Comments
[Updated 2/24/2017] “Matter of Ho-compliant” means “satisfying requirements for an EB-5 business plan.” The phrase refers to the precedent EB-5 decision Matter of Ho, which in 1998 defined what constitutes a comprehensive business plan as contemplated by the EB-5 regulations. Today, we needn’t refer back to the precedent decision because the new USCIS Policy Manual chapter on EB-5 incorporates the old Matter of Ho definition.
Quoted from 6 USCIS-PM G Chapter 2(B)
B. Comprehensive Business PlanA comprehensive business plan should contain, at a minimum, a description of the business, its products or services (or both), and its objectives.
The plan should contain a market analysis, including the names of competing businesses and their relative strengths and weaknesses, a comparison of the competition’s products and pricing structures, and a description of the target market and prospective customers of the new commercial enterprise. The plan should list the required permits and licenses obtained. If applicable, it should describe the manufacturing or production process, the materials required, and the supply sources.
The plan should detail any contracts executed for the supply of materials or the distribution of products. It should discuss the marketing strategy of the business, including pricing, advertising, and servicing. The plan should set forth the business’s organizational structure and its personnel’s experience. It should explain the business’s staffing requirements and contain a timetable for hiring, as well as job descriptions for all positions It should contain sales, cost, and income projections and detail the basis of such projections.
Most importantly, the business plan must be credible.
USCIS reviews business plans in their totality. An officer must determine if it is more likely than not that the business plan is comprehensive and credible. A business plan is not required to contain all of the detailed elements, but the more details the business plan contains, the more likely it is that the plan will be considered comprehensive and credible.
As indicated by the Policy Manual definition, EB-5 requires a business plan that is comprehensive (covering typical business plan content from business description down to financial projections) and also credible.
What “comprehensive” means
The Policy Manual definition gives a handy rundown of content categories that should be in a business plan. The Manual states that an EB-5 plan is not required to contain all of the detailed elements, but in practice the plan had better address each element or risk a Request for Evidence. It is only safe to omit manufacturing and production process and supply and distribution contracts (if such content is inapplicable to the subject business). Regional center plans that rely on indirect job creation can omit discussion of staffing requirements, and instead discuss inputs to the economic model. Otherwise, cleave closely to the USCIS definition of a comprehensive business plan. Business plans are most likely to be judged not comprehensive if they have insufficient market analysis (particularly if they fail to identify the target market and provide a competitor pricing comparison) or insufficient financial information (particularly if they fail to explain the assumptions behind the income projections). Market and financial analysis help make the difference between a mere business description and a business plan, and are also essential to establishing credibility. The Policy Manual says that generally “the more details the business plan contains, the more likely it is that the plan will be considered comprehensive and credible.” The emphasis is on detail, not length. USCIS identifies “all rhetoric, no substance” as one of the most common EB-5 business plan deficiencies (IPO Training p. 53). A good business plan is concise, and avoids unnecessary detail that slows review and obscures essential detail.
What “credible” means
USCIS adjudicators have three main questions in mind when assessing the credibility of an EB-5 business plan: Is the business feasible? Are the assumptions described in the business plan reasonable? Is it more likely than not that the NCE will create 10 qualifying jobs per investor? (IPO Training p. 47)
To be judged feasible, the business plan should be coherent and supported by evidence that the business has the necessary resources and permissions to develop as predicted. USCIS focuses particularly on schedule and permitting detail and personnel experience to assess feasibility.
Demonstrating reasonable assumptions requires evidence. The market analysis and the financial projections should be well-footnoted with reference to verifiable market and industry data. Sources may be data available online or third party exhibits.
To demonstrate job creation potential, a direct EB-5 plan must include a detailed staffing section that defines full-time positions, provides job descriptions, and gives a hiring schedule. To be credible, the staffing section must be consistent with the plan as a whole. USCIS will issue a Request for Evidence if the staffing levels, hours, wages, and job descriptions are not consistent with the business description, size of the facility, development schedule, or financial projections.
A regional center EB-5 plan provides inputs (usually expenditures and revenues) for an economic analysis of job creation. To show the credibility of these inputs, the plan presents the logic, assumptions, corroborating evidence, and schedule behind the development budget and revenue projections. The business plan references job numbers estimated by the economic impact report, and correlates job creation with the planned EB-5 investment amount.
Additional Considerations
Policy specifically requires the EB-5 business plan to establish prospective job creation, but business plan content is also relevant to other EB-5 requirements. For example, in determining whether capital has been placed “at risk”, USCIS will look to the business plan for evidence of business activity, evidence that EB-5 investment will be used for expenditures related to job creation, and any red flags suggesting impermissible loan agreements or guaranteed returns. (IPO Training p. 52) The business plan describes the flow of EB-5 capital to the enterprise, explains the sense in which the enterprise qualifies as “new,” and identifies the EB-5 investor’s role in the enterprise.
More Information
See also my post Reviewing EB-5 Business Plans, and my website www.lucidtext.com, which describes my business plan writing services.
EB-5 Updates 
The problem with being “Matter of Ho compliant” is that you have adjudicators who have at best a B.A. in degrees such as Urban Planning or some such nonsensical degrees and you have professional regional centers like my two who use PhD level economists and business planners. The adjudicators, in general, don’t understand basic business planning, let alone PhD level planning and economist statements. In the USCIS, if they don’t understand it, then it’s incorrect. These adjudicators don’t understand a lot, hence the 75% RFE rate.
I wonder if you have specific examples of business plan RFE questions that you consider unreasonable?
Absolutely do. In high level economic analysis, NAICS codes are often amended, particularly in cases where there is no prior industry category in that given geography. As an example NAICS code 551111 is the code for bank holding companies. A good economist would acknowledge that with a 551111a meaning amended and then provide the reason for the amended code below as well as the formulas used to come up with the data. You get a USCIS adjudicator who then issues an RFE purely on the basis that 551111a is not an actual NAICS code. No kidding, think and read beyond what is literally in front of you.. The other issue with Ho Compliance is it changes from adjudicator to adjudicator.