Vendor Take-Back (VTB)

A vendor take-back (VTB) is a specific form of seller financing in which the seller accepts a promissory note from the buyer for a portion of the purchase price at closing, effectively lending part of the purchase price to the buyer. The buyer pays the VTB note balance — with interest — over an agreed period after the sale is complete.

VTB financing is common in Canadian business sales where the buyer lacks sufficient bank financing to cover the entire purchase price, or where both parties prefer to structure the transaction to reduce the buyer's upfront capital requirement. VTB notes typically represent 10–30% of the purchase price and carry interest rates negotiated between the parties, usually above the bank prime rate.

From the seller's perspective, a VTB defers receipt of part of the proceeds and creates credit risk — the seller is relying on the buyer to successfully operate the business and make payments. From the buyer's perspective, a VTB reduces the equity required at closing and may improve deal economics if the VTB rate is lower than alternative financing.

See also: Seller Financing, Promissory Note, Closing, Earn-Out.