Lloyds Banking Group is set to close a crucial financial service used by small businesses across the UK, with its invoice factoring operation ending this week.
What is Invoice Factoring and Why is it Ending?
Invoice factoring is a financial arrangement where a business sells its unpaid invoices to a third-party company. In return, the business receives an immediate cash injection, albeit for a value lower than the invoice's face amount. The factoring company then assumes responsibility for collecting the full payment from the original debtor.
According to a report by the Financial Times, Lloyds will cease this service for its small business customers by the end of the week. The Mirror has contacted the banking group, which includes Lloyds, Halifax, and Bank of Scotland, for an official statement.
This decision places Lloyds in line with competitors NatWest and Barclays, which shut down their own factoring businesses several years ago. The FT also noted that HSBC has significantly tightened the criteria for accessing its similar services.
A Year of Significant Changes for Lloyds Customers
The termination of invoice factoring is not the only major adjustment Lloyds has implemented recently. The bank has made several other changes that affect both business and personal customers.
Earlier this year, the process for depositing cheques was altered. Customers can no longer use a simple pay-in slip; instead, they must now use their debit card and enter a PIN to complete the transaction. Furthermore, Lloyds has completely axed the ability to deposit cheques at Post Office counters. This means customers must visit a Lloyds, Halifax, or Bank of Scotland branch or use the mobile banking app.
In another change, Lloyds increased the monthly fee on its Club Lloyds packaged current account from £3 to £5. The fee is waived if customers pay in £2,000 or more each month. This increase also applies to the Club Lloyds Silver and Platinum accounts, which carry additional monthly charges of £11.50 and £22.50 respectively.
Mixed News for Account Holders
Packaged accounts like Club Lloyds offer benefits in exchange for a fee. Club Lloyds provides an annual lifestyle benefit, allowing customers to choose between a Disney+ subscription, six cinema tickets, a magazine subscription, or a 25% discount on selected food and drink brands. Account holders also gain access to a Monthly Saver and up to 15% cashback at certain retailers.
However, there is some positive news for travellers. Lloyds has removed foreign currency fees on debit card transactions, but this only applies when you choose to pay in the local currency abroad. Opting to pay in pound sterling may still incur charges.
The closure of Lloyds' invoice factoring service marks a continued retreat of major high-street banks from this area of business finance, potentially leaving small and medium-sized enterprises (SMEs) with fewer options for managing their cash flow through traditional lenders.
