Got an Answer?
Tell him you're not mixing family with business. You want someone who you can freely hate when they walk muddy boots into your house/teach your spawn a swear word/c**k it up and need to come back out to fix it. You need a licensed and fully insured contractor. Tell him you've already got someone in mind.
As for your parents money, that's not your problem to solve unless they explicitly ask you to. Maybe they don't want the money back. I'd never loan my nieces money, they're family, they can keep it (on the condition that they spend it wisely and don't ask me for money again).
You should never do business with family or friends. It's just not a good idea.
It's up to your parents to ask for their money back. It's really not your business.