First rule.. don't risk money you can't afford to lose.
Does the city or downtown have some sort of revitalization plan? What kind of support is there for small businesses? Not only in the form of incentives but also economic development... are there stats on whether the vibrancy of the downtown area is growing, or is it just a pipe dream?
Take a close look at the small business' financials, their team, what they are trying to do.. has it been done before? Is it new and exciting or are they just trying to do the same thing everyone else has already done? FWIW, 'new and exciting' doesn't have to mean a completely new business concept.. it can be a re-work of an existing one, for example a business concept that has been a proven success in a different city with a similar demographic as your city/town, etc. They don't have to be reinventing the wheel.
Are there other businesses downtown that have tried to do the same? Look at competitors... how easy is it for them to get in the market? Would they face any difficulties?
What successful angel investors have told me (family members, mentors) is that the best way to ensure you get your money back is be involved in the day-to-day of the business. Don't lend them the money and sit back and watch and hope it comes back. Work shoulder to shoulder with them and know everything that goes on. Of course these are people that are investing much, much more than $5K in these businesses, but the principles are the same.
Hope this helps!