Vendor take-back financing in Canada, explained simply

What does a VTB look like?

As a simplified example, a business sells for C$1,000,000. The buyer pays C$800,000 at closing using their available funding, and the seller accepts a C$200,000 vendor note for the balance. That C$200,000 is owed under the note’s terms. This is an illustration, not a suggested financing structure or lending offer.

The purchase price, the amount paid at closing, and the seller note are different numbers. Keep them separate when discussing a deal so that everyone understands how much the seller receives immediately and what remains outstanding.

Why include seller financing in a business acquisition?

A buyer and seller may consider a vendor note when assembling the purchase funding. It creates an ongoing financial relationship, so both parties need to understand what they are agreeing to and how it interacts with other financing. Whether it fits a particular deal is a question for the parties and their advisors.

BDC describes vendor financing as an acquisition funding tool. Its guidance also discusses lender relationships and the seller’s continuing involvement. Those commercial questions should be resolved before trying to organize the post-close administration.

Which details should be clear before closing?

Use the actual documents to create a list of questions for counsel. Do not infer missing terms from a standard calculator or from another transaction.

• Principal: how much is owed under the vendor note?
• Interest and payment schedule: what do the signed documents require?
• Timing: when does the first payment fall due, and when does the note mature?
• Changes: how must an amendment, early payment, or other adjustment be approved?
• Reporting: which information must be provided, by whom, and when?
• Other financing: what restrictions or priorities should the parties understand?
• Security and remedies: which documents and professional advice apply?

How is a seller note different from an earnout?

A vendor note records a debt under agreed terms. An earnout links some consideration to future outcomes under its own agreement. A deal can contain both. Keep each obligation distinct and ask your advisors to explain any uncertainty in the drafting. A single label such as ‘deferred payment’ is not enough to determine the calculation or the parties’ rights.

What happens after the deal closes?

Set up a shared record of the confirmed schedule, payments, reporting dates, and supporting documents. When a payment is reported, distinguish the scheduled amount from the amount actually recorded as received. When a term changes, retain the original record and the approved amendment.

Dealosure is being designed to organize those records for Canadian business acquisitions. It will not provide acquisition financing, initiate payments, or guarantee that a seller note will be repaid. Contact the team to discuss how this workflow could fit your deal.