Small Claims...

Some small claims courts actually will not allow you to "take the hit," so to speak. This makes sense from that standpoint that the purpose of small claims court is to make you whole. Rendering a verdict of $3,000 for a dispute that cost you $7,000 certainly does not make you whole.
Some small claims judges will simply dismiss your case without prejudice. You will need to check on the specific rules in your jurisdiction.
You will need to prove your case by a preponderance of the evidence -- meaning more likely than not. Other than that, it's difficult, if not impossible, to say what proof you need without listening to what the other side has to say. That's why judges listen to both sides before making a decision.