I might be swayed that it's a business purpose transaction, perhaps depending on if the Borrower has other rental property or has rents as a significant portion of his/her income. The loan from the parents could still be considered a business purpose loan which was used to acquire the investment property, like a hard money loan.
I don't know... maybe not.
I think if the loan were not from the parents, I could justify a business purpose. As you explained it though I guess I end up on the same side as Dan.