Take collateral. Make them give you something of theirs that is worth at least, if not more, than the value of the loan. Don't give it back until the last penny is repaid. A lending institution would do this and that's what you are to them. Question: why don't they use a formal lending institution? Have they tried? Can they prove it? Question the bejesus out of them before you move forward and hand them any money; that's what would be done in a more formal setting. This is about money, not hearts and flowers. Do the business thing.
Take control of any loan by doling out the funds yourselves, don't just hand them a chunk of cash. Whatever you do, don't sign or co-sign anything for them. If they genuinely need help they'll be open with you and glad their needs are being met; they won't stumble over who's doing the controlling.
If they won't agree to terms such as these, just treat 'em like mushrooms (keep 'em in the dark and feed 'em BS!)