A federal program designed to encourage foreigners to invest millions of dollars in U.S. small businesses is receiving a lukewarm reception, despite its promise of 10,000 visas for the investors and their families.
When the Alien Entrepreneur program could attract as much as $4 billion and create as many as 40,000 jobs a year. But people trying to make the deals say the Immigration and Naturalization Service's slow response is thwarting their efforts to revive hundreds of U.S. small businesses.
"The INS couldn't have butchered the implementation any more than they did," said Harold Ezell, former commissioner of the INS' Western region. Mr. Ezell founded Ezell Group, a Newport Beach, Calif., consulting company, after leaving the agency in July 1989.
"We submitted our first application on Sept. 30," he said. "It took until Feb. 1 to get it through."
The INS has received 343 applications. As of May, the service had approved 53 and denied three, said Duke Austin, spokesman for the INS in Washington. The Southern region received 124, the Western region 107, the Northern region 58 and the Eastern region 54.
The program requires investors to invest $1 million in businesses in urban areas or $500,000 in businesses in rural areas. The money must create at least 10 full-time jobs within two years.
Mr. Austin defended the INS application-processing system and pointed out that Congress, not the INS or the Bush administration, initiated the investor visa program.
"We don't go begging for people," he said. "We have 3 million people waiting in the queue, and some have been waiting for eight or nine years."
The INS had no expectations for the program, but Congress and businesses "clearly expected a bigger response."
Mr. Austin and others said a major drawback for foreign investors is that the program requires that all of their income be subject to U.S. taxes.
Still, the few U.S. business owners who have benefited from the program said it's a good idea.
"We see it as a win-win situation," said David Lamb, general partner of Stratham Group in Newport Beach, Calif. His firm was among the first to benefit from the program.
Mr. Ezell introduced Mr. Lamb to a Taiwanese family that put up $1 million to form a limited real estate partnership. The partnership owns a piece of property and is setting up a property-management company.
It took more than year for the deal to come together, but the money finally came in last fall.
Although they are still abroad, Mr. Lamb's Taiwanese partners participate in board meetings and are learning the property management business. "Eventually, we would like to hire 30, 40 or 50 new employees for the company we've created," said Mr. Lamb, who now employs 180.
Jon Basel, a San Pedro, Calif., management consultant, is trying to match Hong Kong investors with U.S. business owners. He said foreign investors are looking for well-managed small businesses in every field. But not everyone wants to move to the United States.
"Eighty percent of the people I meet with are looking to invest, but they've already bought a visa for Canada or Australia," Mr. Basel said. Those countries are offering investor visas for $250,000 to $500,000.
The investors he meets require U.S. business owners to provide a detailed business plan. They also expect to make money on their investment.
"Foreign investors say, 'Treat me better than I would be treated if I put the money in the bank.' "