What Does Vendor Take Back (VTB) Mean?A vendor take back is a type of non consideration often used by buyers to finance the total purchase price of a company. It provides a buyer with a source of financing without having to access the external debt market and pay fees. For the seller, it is a good alternative to receiving cash or stock in the buyer depending on how favorable the interest and terms of the vendor take back are.
Vendor take backs are either unsecured or secured but subordinated to senior debt. This makes the debt more risky, which allows it to command a higher interest rate or other premium terms such as equity kickers. While terms can vary, a typical vendor take back will pay interest only for a period of time with principal repayments being made out of the company's free cash flow before any dividends are paid.