It would be far simpler to put the $500,000 in a bank account owned by the LLC and you immediately own a fixed percent.

First, banks do not prefer W2 income over 1099 income at all.

He is very good about deductions on tax returns so his income looks negligible and of course banks wont talk to him about loans.

Alternatively, if the bank ( assuming there is a bank) is fine with it, you could negotiate a credit and escrow the funds to be released after you do it yourself.  

If you go with the partnership route1) You need to manage the money going in and out of the business bank account.2) File a partnership return and be responsible for issuing K-1's3) make distributions to you and your partner for cash flow that you receiveYou will likely spend many hours on a nice gesture.I may want to consider instead to give a christmas gift or a bonus for early completion of projects.

I've also used traditional loans through regional banks and a few SBA loans. 

-Local banks were the best.

You might find a local credit union or community bank that will go to 95 -100%.At one point I called 2 different VA Regional Loan Centers regarding this section in the VA lenders handbook:Assumability - The second mortgage should not restrict theVeteran’s ability to sell the property any more thanthe VA first mortgage.

cant pull those off with smoke and mirrors :)   and of course my bank that has loaned me about 60 million to build all this thinks I have morals and character as its the cornerstone concept when lending this kind of money on spec builds.. you dont have it you dont get the money.

AJ Dicarlo Rate (broker and will be able to match with multiple lenders instead of a smaller bank or network)