Yes, it is permissable for a Muslim to borrow from someone in such a situation. The daleel (evidence) for this is that the Prophet (peace be upon him) borrowed from the Jews and they were dealing in riba. Furthermore, in most cases, such a person's income is not totally haram, because it is a mix of earnings gained by selling both halal and haram items. However, you should advise him and clarify to him the Islamic ruling on what he is doing.
Sheikh Muhammed Salih Al-Munajjid