In your MTO ventures, you will come across the term, Good Funds (Settled) Model. What does it mean? Who would be using this term and why is it important for you to understand it?
Have you ever heard the term, ‘what is a good funds settled model?’ The term ‘good funds’, what does that mean? Good funds is a term used in the industry that’s very common is, you know, post processing.
A good fund settled model means that money is now available. That means let’s say a cheque was given and processing, it will take four days to clear. Once the funds are cleared and in your account, good funds. The funds are good. Good and settled. So what does it mean to say ,you know, we work around good funds settled model? That means we will not extend any credit. We will wait for the instrument to clear into our account. Once it is credited into our account, that is the model we will work with and we will not be issuing any credit.
In cases of let’s say you have a payout partner in a different country and say, ‘Hey listen I’ve received the money, can you do a payout?’ If you don’t have a prefunded account, they may come back to you and say ‘Listen I’m sorry. We only work on a good funds model.’ That means we will not push the funds out until the funds are literally in our account. Hence, we are not extending you credit. A good funds model means, give the instrument, have the funds credited to my account and only then we will make the payout.
I hope I was able to answer the question. As always if you have any questions, feel free to ask in the comments below. I’ll be happy to answer. till next time, take care.