Can a 100% ESOP company borrow money through the plan to buy other assets?

It can, but given that virtually all 100% ESOPs are S corporations and pay no tax, there is no tax benefit to doing so. This may be a way, however, to get shares to new employees. Say a company wants to borrow money to buy a building (or any other asset). Shares would be allocated to employee accounts, with much the same impact as in the question “Once a company is 100% employee owned, can it issue additional shares to the plan?”, although with some important twists. The additional leverage would affect the company’s balance sheet, lowering the value of the shares until the loan is repaid, other things being equal. While individual employees would see a dilution in the percentage of the company they personally have allocated to them, if the asset pays for itself as the loan is repaid, the value of these shares would ultimately be as high or greater. Prior to the loan being repaid, however, the value could be lower.
Companies can also use this mechanism to buy other firms, usually then incorporating their workforce into the ESOP. The dilution and allocation impact would be much the same as above.

How difficult is it for employees to acquire 100% of a company in a single leveraged transaction?
It has become increasingly common for an ESOP to buy 100% of the shares in a single transaction, but only if there is a seller note for all or a very large part of the total financing. Banks or other third-party lenders will not finance a 100% transaction. If a seller note is used in conjunction with third-party financing, the seller note will be subordinate to that financing.
Lenders typically will loan between 50% and 70% of the collateral on the debt, depending on its quality. This collateral could be corporate assets or, in the case of a selling shareholder, the replacement securities the selling shareholder purchases. If both are offered, this could, but generally would not, bring the collateral value over 100% of the sale price, making a 100% transaction feasible. In a few cases, the difference could be made up by employees purchasing shares directly in the ESOP, but this involves substantial securities law compliance.
If seller notes are not involved, ESOPs usually get to 100% ownership in stages.

Once a company is 100% employee owned, can it issue additional shares to the plan?
Yes. In one approach, the company could simply print additional shares and contribute them to the plan. The company would receive a tax deduction for their value. The maximum percentage of eligible pay that could be contributed would normally be 25% for plan years starting after December 31, 2001.
There are a number of effects from doing this. First, the company increases its cash flow by lowering its tax bill. Second, it dilutes the ownership interest of existing owners, although this dilution is ameliorated by the fact that most of these additional shares will be reallocated to existing employee owner accounts and by the positive impact of the tax benefits on the company’s value. Third, stock will be made available to new employees.
In choosing this option, companies need to coordinate it with their repurchase obligation. If the ESOP is repurchasing shares from departing employees, these will be reallocated to employee accounts. Companies would be making cash contributions to the ESOP to make these purchases. Additional shares could be contributed, provided the contribution limits are not exceeded, but companies need to evaluate just how many shares they want to reallocate on an ongoing basis. The additional stock contributions are discretionary, however, so this can be done year by year.

Source: National Center for Employee Ownership (NCEO)