Answer
(Fatwa: 766/739/N=1433)
It is unlawful and haram to take interest based loan from the bank for business. It is necessary to avoid it in any case, so you should stop your friend from it. But if he has already taken the interest based loan from the bank then since the amount of the loan is not haram rather the haram act is to give interest and do interest based dealing; hence it shall be lawful to make your friend partner in the business with this amount. However it is far better and desired to save oneself from it and to start the business in the partnership of a person who has interest free loan.
Allah (Subhana Wa Ta’ala) knows Best
Darul Ifta,
Darul Uloom Deoband