No blanket prohibition applies. What matters is the character of the debt: an obligation secured by the assets of the enterprise being acquired is treated differently from one supported by the investor's own assets or guarantee. Have counsel review the actual note and security documents rather than assuming that any financing either ruins or rescues the case.
Bring the financing documents to the first review
The term sheet, draft promissory note, security agreement, personal guarantee and the purchase agreement should be reviewed together, in the same sitting, before signature. Their interaction, meaning what is pledged, who is liable, and when the buyer's money becomes irrecoverable, is the whole question. If terms are still being negotiated, that is the moment when a change costs nothing.
Ask what alternative structure counsel would prefer and why, then take it back to the seller. Bring the term sheet, the draft promissory note, the security agreement, any personal guarantee, and the purchase agreement to the same review, in the same sitting, before signature. Their interaction is the whole question: what is pledged, who is liable, and at what moment the buyer's money becomes irrecoverable.
No blanket prohibition applies to financing, and the character of the debt is what matters, so an obligation secured by the assets of the enterprise being acquired is treated differently from one supported by the investor's own assets or guarantee. Ask what alternative structure counsel would prefer and why, then take that back to the seller while the terms are still open.