Is this a viable RE investing strategy?

[Account Closed]

I think I may be on to something. I need you guys to do everything in your power to convince me that I am not and that this is all crazy... I say that tongue in cheek.  A lot to share and I'll be as concise as possible. 

My background is in short term working capital. I would routinely encounter business owners who put themselves in a bind because they would irresponsibly go out and take MULTIPLE concurrent short term working capital loans at one time. 

Short term working capital loans work something like this; a business owner receives a sum of cash. He's / she is responsible for paying back that cash + a fee in fixed DAILY payments. 

In the case of daily payments, the payments are spread out over 4-12 months depending on credit and other factors.  Generally speaking, the owner will pay back 1.24x - 1.48x what he / she borrowed. So, if you got $10k, you can pay back up to $14,800.

In speaking with an old client, I found the guy to have taken 3 concurrent loans / advances at one time.  First of all, lenders put language in their contracts that prohibit this.  But they do it anyway. 

Anyway, guy calls me for help and there's nothing I can do for him. More short term capital is not going to help - at all. Just makes matters worse.  That's IF I can get him approved. He's in danger of losing his business and I pondered the following...

Overview of the Problem:

• Business owner is debited around $500 per day in service of short term working capital loans.
• Business owner owes roughly $40,000 total and is scheduled to pay the money back over the next 100 days. The problem is, he may not make it the full 100 days. If he closes shop, he'll be facing judgements in court from these providers, etc.
• Business owner owns roughly 50% of his home valued at $300k
• Business owner's FICO score disqualifies him for more traditional / sensible financing which is why he opted for short term working capital in the first place.

Proposed Solution:

• Come in and pay off the existing $40,000 owed to short term working capital providers on behalf of the business owners.
• Take deed to the property under a sub to arrangement.
• Lease option the property back to the business owner allowing him to stay in his home.
• Charge a reasonable fee for the $40,000 and lump that in with the monthly mortgage payment and spread the payments over 24 months.

Expected Result ROSY Scenario:

• Business owner will free up cash flow. Will go from seeing $10,000 / mo + mortgage going out the door to roughly 1/3 of that going out the door on a monthly basis. He will no longer have his daily cashflow decimated due to daily debits, which can sometimes lead to overdrafts.
• Business owner will be able to get his credit back in shape.
• Business owner will exercise his right to re-purchase his home as he'll be qualified for a HELOC / 2nd mortgage.
• He will have learned his lesson, I will have made a nice return on my capital while holding the deed to the property where he owns 50% equity as my security. 

No So Rosy... But, Unfortunately Likely Scenario:

• Business owner will not take the steps to be responsible and repair his credit. 
• Business owner will go back to the same working capital providers and take more money again.
• Business owner will be unable to exercise his option. (I believe the data says 4/5 of DO NOT exercise their option).
• Business owner will place himself in a position where he's given up $150,000 in equity and received $40,000 in cash for it. 

Finding these business owners who have put themselves in distress requires pulling UCC data from the states and collating it using software. Not a quick and simple process.  I'm inclined to do more digging pull records, append contact data, do outreach, and have convo's to see if there's any merit to my approach but would appreciate you guys' thoughts and questions. The tougher the question - the better.

Thank you!