Does the bank need to approve a vendor take-back arrangement before it will lend me the rest?

In practice, usually yes, even though it is not a strict external legal requirement so much as a practical reality of how commercial lending works. A bank financing the balance of an acquisition alongside a seller's vendor take-back will generally want full visibility into that arrangement, including its size, repayment terms, and where it ranks against the bank's own security, since a seller's take-back note directly affects the buyer's overall debt load and the bank's assessment of its own risk.

Finalizing the vendor take-back's terms with the seller before bringing them to the bank can backfire if the bank then requires changes, such as a smaller note, different repayment terms, or subordination behind its own loan, forcing the buyer back to the negotiating table with the seller after that deal already felt settled. Coordinating both sides of the financing at the same time, rather than sequentially, generally produces a smoother path to closing and avoids surprises for either the seller or the buyer late in the process.