Lloyds Banking Group has confirmed it will close a key financial service for small companies by the end of the year, in a move set to impact thousands of business owners across the UK.
What Service is Being Cut?
The group, which operates the Lloyds, Halifax, and Bank of Scotland brands, is axing its invoice factoring service. This facility allows small businesses to borrow money against unpaid invoices from customers, providing a crucial source of working capital to manage cash flow.
The decision, first reported by the Financial Times citing two sources familiar with the matter, marks a significant shift in strategy. It reflects a broader trend among the UK's largest lenders, who are increasingly pivoting their resources towards serving larger, more lucrative corporate clients.
Industry Reaction and Small Business Concerns
The news has sparked concern among business advocates. Craig Beaumont, Executive Director at the Federation of Small Businesses, urged banks to adopt a more supportive stance. "As cost pressures rise across employment, business rates and energy — and as interest rates fall — banks should take a more generous position to help small business owners access working capital," he stated.
Nathaniel Southworth, Managing Director of North Yorkshire toy distributor KAP Toys, highlighted a common frustration. "The mindset of traditional banks is that they would like a company’s finances to be nice, uniform and easily predictable," he said. "I would love that to be the case as well. But the reality of business is it’s quite rarely like that and I think sometimes smaller businesses can feel shut out."
A Wider Banking Trend
Lloyds is not the first major bank to retreat from this market. According to the FT report, both NatWest and Barclays closed their own invoice factoring operations several years ago. NatWest's unit reportedly had fewer than 1,000 customers when it was shut down in 2021, a figure attributed to falling demand.
While HSBC has stated it remains "committed to supporting small businesses... including helping them access the most cost-effective lending products for their needs," it has also tightened the eligibility criteria for its own invoice factoring service. A source close to Barclays noted the bank continues to offer other forms of invoice financing.
Lloyds Banking Group itself has declined to comment on the closure. The move leaves a shrinking pool of high-street banking options for small firms reliant on invoice finance, forcing many to seek alternative lenders as the year-end deadline approaches.
