We are now in Bava Metzia, Chapter 5, Mishnah 6. The mishnah opens with a description of an iska - a joint venture - that is invalid, because it does not follow the structure we learned, where half the principal is given as a deposit and half as a loan. Here it says that if the entire investment is structured as a loan, it is forbidden. There is no major novelty in this; the novelty is actually found later in the mishnah.
"Ein mekabelin tzon barzel miYisrael":
The entrepreneur, the active partner, may not accept the principal from the investor in the structure known as "tzon barzel", which is nothing more than a loan. This term is also familiar from the laws of the kesubah, when a woman brings "nichsei tzon barzel" into the marriage. Literally: "tzon" - a flock, and "barzel" - iron, meaning an asset of an "iron flock."
The origin of the phrase lies in how this was actually done: A person brings a flock of sheep into a marriage, or gives a flock to his friend to run a business and an agricultural farm with it, and says: The flock is a dynamic asset - the wool grows, animals are born and die, and there is milk and cheese. I do not wish to take on any responsibility or risk, lest you tell me later that the sheep were devoured by wolves or that their value dropped. Therefore, let us appraise the flock now, and establish that its value is a million dollars; from here on out, I have no interest in what happens to it. If it increases - great, and if not - I have no interest in that, provided you return the fixed sum to me. This fixed sum is called "tzon barzel", as if it were made of iron, since its value does not change.
This is where the problem of ribis (interest) arises: When the investor provides the animals to manage the farm, he must give half as a deposit and half as a loan for the transaction to be valid. But if everything is given in a way where he says, "I am giving you the animals to set up a farm, but they are worth a million dollars, and at the end of the day I want my million in cash" - this is a complete loan. And since he must return everything, there is no deposit here at all, only a loan, and therefore it is forbidden. And this is the wording of the mishnah: "Mipnei shehu ribis" - the profit that will be distributed in addition to the return of the principal is interest in every respect.
"Aval mekabelin tzon barzel min ha'oved kochavim":
If a person finances his business with non-Jewish capital, and turns to non-Jewish investors, he is permitted to enter into a regular tzon barzel transaction with them, which is a simple loan, since it is permissible to pay interest to a non-Jew. Not only that, but this is stated in the verse: "Lanochri tashich" - to a foreigner you may pay interest. And the same applies in reverse: a loan from a non-Jew or to a non-Jew is meant to be done with interest, and this is the normal way of a loan.
The reason different laws were established for a Jew lending to a Jew is not because charging interest is immoral, unjust, or unfair; charging interest in itself is perfectly fine. Rather, the Torah wants a person to treat his fellow Jew like a brother, and teaches a moral principle here: It is not fitting to charge interest to a brother in need of money. You must care for him with an interest-free loan - a preferred method over giving a grant or charity: lend him the money, and he will return it when he can.
"Vechen beger toshav":
Here there is a certain novelty: The law for a ger toshav is the same as for a non-Jew, like a regular non-Jew in every respect. A ger toshav is a non-Jew who is permitted to live in the Land of Israel - hence the title "toshav" (resident), like a legal alien resident. And why is he permitted? Because even though he is not Jewish, he observes the Seven Noahide Laws and fulfills everything required of him as a non-Jew. He is an outstanding person, and merits a share in the World to Come.
Indeed, in the verse in the Book of Vayikra that establishes the obligation to support the poor, it says: "If your brother becomes impoverished and his means fail with you, then you shall strengthen him, a stranger and a resident, that he may live with you" - if you see your brother who has become impoverished and his means fail, you have an obligation to support him, and the same law applies to a "stranger and resident", which is a ger toshav who is permitted to reside in the land. Thus, in matters of welfare and supporting the poor, the Torah includes not only your impoverished brother, but also the ger toshav.
The following verse says: "Do not take from him interest and increase, and you shall fear your God, and your brother shall live with you." Seemingly, it would make sense to say that since the previous verse obligated us to support both a Jew who fell into hardship and a ger toshav, the prohibition against interest should apply to both of them as well. But our mishnah teaches that this is not the case: A Jew receives an interest-free loan, whereas a ger toshav is not included in this. This is learned from a precise reading of the text: Even though the beginning of the matter spoke of both of them, the verse specifies "al tikach mei'ito" - do not take from him, in the singular, and not "from them." The singular form refers only to one, namely your brother, from whom no interest is taken; but from a ger toshav, interest is taken.
"Malveh Yisrael ma'otav shel oved kochavim":
The final part of the Mishnah is somewhat of a new topic, and its explanation is a bit complex. The text of the Mishnah states: "Malveh Yisrael ma'otav shel oved kochavim mida'at oved kochavim, aval lo mida'at Yisrael" - a Jew may lend out the money of a gentile with the knowledge of the gentile, but not with the knowledge of the Jew. What is the meaning of this?
The Bartenura explains it as follows: Reuven borrowed money from Chris the gentile with interest, and now Shimon asks Reuven for a loan. Reuven tells him: "I have no money to lend you, besides the money I am about to return to Chris, who charged me ten percent interest." Regarding this, the Mishnah says that the money can be transferred to Shimon "mida'at oved kochavim" - with the knowledge of the gentile: Reuven approaches Chris accompanied by Shimon and tells him: "Here is the money I owe you and I am returning it to you, but Shimon is a reliable person - will you lend it to him now, and he will gladly pay you the ten percent?". If Chris gives the loan to Shimon, it is valid, since the loan is given with the gentile's agreement and the gentile is the lender. And even if the money actually passes from Reuven's hands to Shimon, there is nothing invalid in this, since its source is in a new loan given by Chris.
What Reuven is not permitted to do is to hand the money directly to Shimon and say: "This money costs me ten percent; pay me the ten percent, and I will transfer everything to Chris when returning the debt, solely to cover my costs." This is forbidden according to all opinions. A practical application: if a Jew lends his credit card to his friend, the cardholder is not permitted to roll over to him the cost of the charge that he himself is obligated to pay; if the borrower is required to pay interest to the cardholder - this is forbidden. The reason, according to the Bartenura, is that Reuven is lending money to Shimon and only claiming that he deserves a reimbursement of expenses, and it turns out that Reuven is lending with interest; and the purpose of the interest does not matter at all.
This, then, is how the Bartenura explains our Mishnah: if the loan comes at the direct request and instruction of the gentile - even if it passed from Reuven's hands to Shimon, it is valid; but if it comes from Reuven without this arrangement, it is from Reuven, and it is forbidden.
However, the Gemara rejects this understanding, since it is inconceivable that Reuven would hand money to Shimon as an interest-bearing loan and the matter would be permitted. According to the conclusion of the Gemara, and as the Tosafos and the Tosafos Yom Tov explain, the meaning of the word "mida'at" here is 'by' or 'from the hands of'. Therefore the meaning is: if Reuven arranges the loan for Shimon, brings him to the lender and the like, as long as the one who actually hands over the money is the gentile and not Reuven - it is permitted, even though Reuven is the one who caused the matter and was involved in it, and even though one might have thought that due to his involvement he would be considered responsible for the loan and it would be forbidden. But if he actually intervened and the money passed through his hand, as in the Bartenura's description - the matter is forbidden.
In summary: This is the conclusion of the Gemara and this is the halachah. The bottom line: a Jew is not permitted to lend to another Jew with interest, even if his entire intention is only to cover his costs, since the matter is considered as a new loan on his part. And even if a Jew assists his friend to obtain an interest-bearing loan, the money must be given from the gentile to the second Jew directly.