Sourcing Fee
Definition
A sourcing fee is a fee captured by a platform or issuer for finding, negotiating, acquiring, packaging, or otherwise arranging an investment asset. In a royalty offering, it may be deducted from gross offering proceeds before remaining capital is allocated to the underlying royalty asset or issuer purposes.
Why it matters
Sourcing fees can materially reduce the buyer's effective per-dollar exposure to the underlying asset. A disclosed sourcing fee is not inherently improper, but it changes the economics: the buyer is paying not only for royalties, but also for the platform's access, structuring, diligence, and distribution work.
Common misconceptions
- •A sourcing fee is not the same as an ongoing management fee; it is usually captured at the point of sale.
- •The fee can be fully disclosed and still materially affect buyer returns.
- •A high sourcing fee should be analyzed alongside acquisition multiple, Use of Proceeds, and ongoing admin fees.
Technical details
SongVest context
SongVest offering circulars disclose sourcing fees as part of the Use of Proceeds. AltStreet's SongVest review analyzes how these fees combine with acquisition multiples and debt-repayment allocations.
Buyer math
If an offering has a 30% sourcing fee, then only 70% of gross proceeds remains before other expenses or allocations. The investor's economic exposure should be modeled after all such allocations, not on gross proceeds alone.