The former business secretary said the offer to take a 25% stake in the firm's UK operations is "quite close" to what he would have offered.
He said it showed a commitment to south Wales after Tata announced it would sell its loss-making UK operations.
But he said it was only a first step, with the steel market "awful".
"The 25% offer is quite close to what I would have done," said Sir Vince, who served in the coalition government between 2010 and 2015.
"It sends the right message the government is committed to south Wales and the steel industry and it is within the rules we have to operate."
However, speaking to BBC Radio Wales' Good Morning Wales, he said there were still "a lot of hurdles to overcome".
"We don't know who the buyer is and if there is a buyer, if they will succeed because the economics of the situation at the moment are pretty awful with the low world prices [for steel] and ferocious competition," he said.
This makes a management buyout "risky", Sir Vince said, adding that, long-term, habits in British industry must be changed, with a proper strategy drawn up and more products used that are made in the UK.
Responding to suggestions his successor as business secretary, Sajid Javid, had been slow to intervene, he said the government was "reasonably cautious" because of the "economics of the industry".
He said: "They haven't done a complete U-turn, but they have acknowledged reality that government has an absolutely key role working alongside private business and I'm encouraged by that.
"As a starter it is a good move and we should applaud it. Let's hope there is a good buyer and they can turn it around".
A Tata Steel management buyout is "risky" but the UK government's offer of help is a good one, Sir Vince Cable has said.