Lloyds to close invoice financing service, FT reports

Lloyds Banking Group will shut down its invoice financing service for small and medium-sized businesses by the end of 2025, the Financial Times reported, marking another major lender retreat from specialist financing for smaller enterprises.

The service, known as invoice factoring, allows firms to sell their unpaid invoices to a bank at a discount in exchange for immediate cash flow — a crucial lifeline for companies struggling with late payments.

Lloyds’ exit follows similar moves by rival UK banks, including NatWest and Barclays, which have either closed or scaled back their factoring operations in recent years. HSBC has also tightened eligibility criteria, effectively limiting access for many small businesses.

Industry insiders describe the product as difficult for large lenders to operate profitably, especially given rising operational costs and limited opportunities to cross-sell other services to small firms. With less than 1 percent of Lloyds’ SME clients using the service, the bank views it as a niche offering within its broader commercial portfolio.

The decision has drawn criticism from business groups, who warn that reduced access to working-capital finance could further strain small firms already contending with rising costs and slow payments. Craig Beaumont of the Federation of Small Businesses said that, in a climate of cost pressures and squeezed margins, banks should be more supportive of SMEs’ access to credit.

Lloyds has stated that alternative support options will be available to its small-business customers, although it has not detailed specific replacements for the exiting service.

Economists suggest this move highlights a broader shift in UK banking, with major lenders increasingly focusing on higher-margin corporate business and standard credit products, leaving specialised financing to smaller, niche lenders.