When you meet Lloyd on the roof of Twinkle Elementary, he says he wants a Bottle Rocket from Sweet Little's Factory.
Explore the Factory
You can reach Sweet Little's Factory by going south from Twinkle Elementary.
The Short Route
There are a lot of items that you can find in the Factory, but if you don't want the items right now, you can take a quick route through the Factory to get the Bottle Rocket for Lloyd. (If you do want all the items, skip to the next section.)
Go west until you see a ladder to the north. Go up it. Then go east until you see a ladder. Go up it. Then go west and you find a trash can. Check it to get a BottlRocket. Every time you check this trash can, you get a Bottle Rocket. But you just need one for now. Then skip ahead to Give Lloyd the Bottle Rocket.
The Long Route
There are lots of useful items hidden around the factory, so you might want to store some things with Minnie before you go in. You might want to leave and come back so you can collect everything, or just come back later to get what you missed.
After you enter the factory, go west, and if you want a Magic Herb, go northwest and you will see a door, and inside you can get a Magic Herb. Go west again and you see a door to the north, where you can get a Butter Knife, which is a weapon that you can't equip, and it's not very powerful, so you might want to just ignore it. South of that door, there is a ladder. It leads to several items, but is otherwise a dead end, so if you want to skip the items, then you should ignore the ladder and skip to the next paragraph. If you go down the ladder, you can go east to a room that contains an Antidote. Go west from there and you will see two doors in the north wall. The one on the right doesn't have anything of interest. The one on the left contains a Physical Capsule (permanently increases Strength stat by a small amount) and a Life Up Cream (restores all HP; gone after one use). The door west of that contains a Magic Herb.
Go back up the ladder. Then if you want a Magic Herb and a Rope, go west. The second to last door has the Magic Herb, and the westernmost door has the Rope.
Go east, then go up the ladder to the north. The nearby door has a Magic Herb. If you go west, you find a door to a room that has a Fight Capsule (permanently increases Fight stat by a small amount). Then go all the way east. There is a ladder to the north, but if you go past it, you will find a door that leads to an Antidote.
Then go up that ladder. If you go east, you find a door to a room that contains a Quick Capsule (permanently increases Speed stat by a small amount). Go west from there and you find a trash can. Every time you check this trash can, you get a Bottle Rocket. You just need one for now. The door to the left contains a Plastic Bat (not as strong as the Boomerang) and Magic Herb. Then to the west, there is a present that contains a Life Up Cream.
Give Lloyd the Bottle Rocket
Once you have a Bottle Rocket, go talk to Lloyd. (If you made bread crumbs near Lloyd, just use them to warp instantly back to Lloyd). If you talk to Lloyd with a Bottle Rocket in your inventory, Lloyd will take you to the lab. Then he will make a big mess. Now Lloyd will be in your party.
If you leave the lab and go back in, there is a Mysterious Teacher there who will sell you inventions. They're really expensive, though, and it's bettery to save your money to buy equipment for Lloyd, so just remember this for next time. The only useful invention that the Mysterious Teacher sells is the StkyMachine (a.k.a. Slime Gen. in the fan translation), which does the same thing as PSI Paralysis (stuns enemy and prevents enemy from using PSI). It costs $3200.
Now that Lloyd is with you, you need to help him to go Duncan's Factory, but you should prepare first.