There are MANY skip tracing options.

Leah, I would give lender 1 the option to beat/match your deal.

(And I know a wrap probably isn't the first option many would choose, but I'm in Texas so its really my only option)

I have a few options I can send you.

Another option is to put an electronic deadbolt on the front door with a non-locking door knob.

These programs offer options for less money down and in some cases DPA - Down payment assistance.As a banker for over 18+ years I am very skeptical when I hear a new name in the business only because its become tougher to lend with all of the new laws and credit/insurance requirements and regulations.  

The fact that a company has stoped paying interest on a promissory note and is exercising an option stated in the note to convert the note to equity is not in and of itself indicative of any fraud.  

It's not worth hiring a lawyer but as you suggested, small claims court may be an option IF you hired them in your personal capacity OR if your jurisdiction allows LLC owners to go to small claims and represent the LLC in court (many, most?

If you come to the conclusion that you need to focus on your primary earning job but want to start investing in real estate then maybe a turnkey option would be best.

There are also a lot of different options in real estate to single family residential, multifamily, commercial, NNN and then being on the debt side of being the lender which has cash flow but not appreciation.