Private Lending - Business or Personal loan classification

[Steve Hiltabiddle]

I have an interesting lending opportunity that I have some questions on. Hoping to get some feedback.

Owner is an older gentleman who has moved out of the subject property and is now living elsewhere. Now that he is out he is looking to sell the subject property. There is an agreement of sale with a buyer who is getting an FHA loan. I'm told in order for the FHA loan to be approved approximately $15k worth of work is needed on the property (property has an ARV of $80k and is free and clear so I'd be in first position).

This is not a sizeable loan so the borrower has thrown out terms of paying me $3k in 3 months on the $15k loan. A few questions I have:

• -  Even though this is not owner occupied, do the conditions exist that this could be seen as a personal loan versus business loan (borrower is not an entity and has a personal desire to sell the property they have lived in for many years).
• -  Given the return on the loan, and the possible chance this is not a Business loan, does it matter if I classify the $3k as an Equity portion to avoid exceeding usury laws (I know these are state specific)? 

While I’m speaking with an attorney, I wanted to get thoughts from the forum. I don’t know the courts well enough to know if there is any one or a combination of an older seller, potential for loan being seen as a personal/consumer loan and the rate of return would be enough to cause this deal to be completely dismissed as a consumer loan if I had to bring it to court for non-performance.

Thanks in advance for any thoughts.