This article is sponsored by EB5 Coast To Coast. In this Voices Interview, Behavioral Health Business sits down with Steve Smith, Founder and CEO, EB5 Coast To Coast, to talk about why the EB-5 visa program is a perfect fit for behavioral and mental health projects. He explains why operators of behavioral-mental health clinics would want to consider EB-5 financing over other forms of conventional financing, and he also discusses some of the greatest challenges facing behavioral-mental health operators today — highlighting how EB-5 financing can help.
Behavioral Health Business: What career experiences do you most draw from in your role today?
Steve Smith: Helping individuals achieve the American Dream by emigrating to the US is deeply personal for me, as I’m an immigrant born in Taiwan. My mother is Chinese, and my father, a Caucasian American, taught at the Taipei American School during the ’60s amidst a significant military presence. I moved to Seattle at the age of two, grew up there, and attended the University of Washington. With a 35-year career in real estate development and 12 years in the EB-5 business, I find immense fulfillment in aiding others in their journey to the US in pursuit of their dreams.
What is the EB-5 visa program, and what requirements must providers meet to participate?
EB-5 refers to the employment-based, fifth preference visa program, overseen by USCIS (U.S. Citizenship and Immigration Services) under the US Dept. of Homeland Security’s jurisdiction. It caters to immigrant investors prepared to invest a minimum of $800,000 in a business that creates American jobs.
Each investor’s contribution should result in the creation of at least 10 American jobs, encompassing both direct and indirect roles. Typically, indirect jobs outnumber direct ones, and enterprises contemplating the EB-5 route should plan on creating around four to five direct jobs for each $800,000 invested. Notably, the investment is passive, meaning the investor doesn’t engage in daily business operations nor act as an employee. They are purely passive investors.
Our role involves managing these investor relationships. For instance, for a required $8 million, we’d pool 10 investors, each contributing $800,000. We’d then establish a fund with the total amount to invest in a venture like a behavioral health business, overseeing the entire relationship with all the investors so the business remains unburdened.
Why would an operator of a behavioral mental health clinic want to consider EB-5 financing over other forms of conventional financing?
We are less expensive and more flexible compared to traditional private equity. While we are comparable to private equity in many aspects, our cost-effectiveness and adaptability give us an edge. This combination allows for a more accommodating investment environment. Businesses can benefit significantly from our approach, enhancing their financial strategies.
Why would an immigrant investor want to invest in a behavioral mental health clinic through the EB-5 program?
Immigrants get to jump the queue because the addiction epidemic is a declared national emergency. Every day, about 300 Americans succumb to drug overdoses. It’s a sobering number, right? This alarming statistic is what makes it a national emergency. As a result, our investors are afforded a unique advantage: priority in the visa queue.
Instead of waiting years, as is standard for many EB-5 visas, investing in projects of national interest, like addiction treatment, allows them to secure visa approval in just a few months. This expedited process is a significant deviation from the usual lengthy wait times associated with non-prioritized EB-5 visas.
What are some of the greatest challenges facing behavioral mental health operators today, and how can EB-5 financing help?
The foremost challenge for growing businesses is securing financing, especially given the current banking crisis. With notable banks like Silicon Valley Bank and Signature Bank experiencing setbacks, traditional lending avenues have dwindled, particularly for ventures perceived as even remotely risky. In this climate, the EB-5 option remains open and stands out as an even more critical financing alternative due to the scarcity of conventional lending options. The demand for EB-5 financing, given these circumstances, is arguably at its peak.
What is your outlook on financing in the behavioral health industry, given today’s challenging operating landscape?
The primary hurdle today is identifying behavioral health businesses with enduring business models. I have a personal interest in California since I own a home there, but we don’t currently operate in the state. This decision was influenced by information suggesting that around 10% of addiction clinics in California have shut down due to subpar reimbursement rates, possibly from Medi-Cal or Medicaid.
Ensuring that insurance and Medicaid offer coverage for addiction and mental health treatments at sustainable rates poses a significant challenge. There are ongoing efforts to have Medicaid and Medi-Cal in California, and for insurance companies to extend coverage to mental health services. However, in the current scenario, a significant portion of those suffering from mental health issues go untreated either due to financial constraints or lack of coverage.
Finish this sentence: “In 2023, the behavioral health industry has been defined by…?”
…an inexorable upward trend of mental unhealth. Unfortunately, the mental health crisis is intensifying, and we haven’t even reached a plateau. The situation continues to deteriorate without a clear end in sight. It’s imperative that we allocate more resources and attention to address this escalating issue.
Editor’s Note: This article has been edited for length and clarity.
Contact the team at EB5 Coast To Coast to see if your de novo or expanding BH/MH project qualifies for EB-5 financing.
The Voices Series is a sponsored content program featuring leading executives discussing trends, topics and more shaping their industry in a question-and-answer format. For more information on Voices, please contact [email protected].