Self-directed Solo 401k loan note investment question

[Tammy Smith]

A friend who has also partnered with my husband and I for investment and business projects in the past (nothing currently) has the opportunity to invest in a speculative build with an outstanding ROI. He is ready to contribute substantial sweat equity but needs to come in with a cash contribution as well. This speculative project belongs to my husband and I as well as 2 other investors, but we are the property owners and primary. I have a self-directed solo 401k and would be happy to provide our friend with an unsecured hard money loan. However, considering that the project belongs to me and my husband I suspect this could be construed as "self dealing" and would be a prohibited transaction. We would have a note, he would pay interest and the percentage of the project would be 100% his ownership. If we do not bring him into this investment we will bring someone else in, so the project is not dependent on the funds from the solo 401k. He would be an excellent asset to the project not to mention as poor kids coming up together we always try to include each other in the right investments. Does anyone have thoughts or experience with this situation? We are still pretty new at this and any input is appreciated!!