Lloyds: Invoice finance is the future

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Rachael Power
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Lloyds TSB Commercial Finance (LTCF) said the invoice financing market could double in the next 10 years and stressed the need for accountants to recommend it to clients. 

Speaking at the UK200Group Conference in Newcastle about asset based finance today, Roger Brown, a regional director at LTCF, said that "factoring is the future and accountants need to be aware of this.

"Innovative accountants who have good relationships with their client base need to be aware that this market is growing hugely and could double in the next 10 years," he said.

Brown also announced a 1% discount on pricing for UK 200 Group members on their asset based finance product, offering two instead of three per cent over the base rate. 

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22nd Nov 2012 21:59

They would say that wouldn't they

What a surprise a form of finance which is far more profitable and gives security over specific assets (invoiced sales) and the banks want to promote it.

So debts secured over assets, probably with a PG attached as well.

...and they breathe a sigh of relief as overdrafts fade into obscurity and the floating charges becomes a thing of the past.

Banks can have their cake and eat it and sod the client.




Thanks (3)
23rd Nov 2012 08:51

I wonder ...

... if Invoice Finance and forced liquidations will be the next 'mis-selling' scandal?

Thanks (1)
By Locutus
23rd Nov 2012 14:23

I'd be interested to know ...
... What percentage of LTCF's clients ever leave invoice financing and also what percentage are still trading 3 years later.

"LTCF ...stressed the need for accountants to recommend it [invoice financing] to clients."

No they don't. Quite frankly I don't want the argument (and PII claim!) with my former client 2 years down the line that the invoice financing I "recommended" screwed up their business.

Thanks (1)
23rd Nov 2012 11:23

Death knell

In my experience any company that gets into invoice financing is doomed to failure.  The banks really mis-sell this stuff and the client usually has no idea of the hideous charges when they take it out.

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By dctynet
23rd Nov 2012 12:01

Well, well,

...the banks selling inappropriate products. Now where have I heard that before?

Is this an article or an advertisement?

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By Ian Bee
23rd Nov 2012 15:05

Around and around

I have been in the profession for over 30 years and this makes its appearance regularly. I first encountered it in the 1980s when it was called "factoring" but it has now been reinvented with a different name.

In principle there is nothing wrong with, in effect, outsourcing your credit control department, but the catch always seems to be the charges incurred, and the fact that you never get rid of the risk. As usual the banks keep quiet about the full details and don't explain it. Next misselling scandal? You would think they would learn.

Thanks (0)
23rd Nov 2012 15:18

No way

I've never seen a happy ending for any client that entered into this sort of arrangement.  Most go to the wall very quickly.

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23rd Nov 2012 15:46

we are unanimous then

will someone please stick it up em

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23rd Nov 2012 17:47

No choice

No wonder that Invoice Financing is on the rise when LTSB and BoS are effectively forcing businesses to use this form of finance. It is a trend made in Head Office.

Thanks (1)
23rd Nov 2012 17:54


sorry no O/D or Loan - but try this and we will stiff you

Thanks (3)
By Glennzy
23rd Nov 2012 22:27

All banks are at it. I was at a presentation by Natwest recently for my local branch network.

They were wondering why their referrals were down lately and wanted to let us know they were still in business and looking for more.

When pushed about lending requirements reading between unless you were a Sheik from Dubai they don't want to know you. The guy down your road who want to lend a few quid to buy a new van can forget it.

The 2 new small business tools they were pushing was using a business credit card to pay for your bills on to get up to 45 days credit on them. Then the old invoice discounting route which they love as basically unless you sell a liver they won't give you an overdraft. They must get a lt of commission for selling these schemes they will be the next PPI as people are forced to take as last resort finance, protecting the bank but giving only a short term gain to the client. Would never recommend it to any of my clients.

Thanks (1)
24th Nov 2012 08:30


If there was more choice in the banking market, these guys would be out of business.

Thanks (0)
24th Nov 2012 21:24

To be honest

There is a time and a place for IF:

1. Businesses expanding rapidly who need increasing cash flow as their sales/debtors increase.

2. Businesses whose trade lends itself well to IF - recruitment. labour agencies.

However it should never be seen as a long term solution. If a business is profitable then sufficient cash from this profit should be retained in the business to enable it to become self sufficient.

This is not easy to achieve though and is where most business who use IF go wrong. They need to be disciplined financially and work to move away from IF over a 12-24 month period.

This is where the accountant should help his client.

Thanks (0)
25th Nov 2012 18:30


Advice from a banker? Invoice financing? Er that’s factoring

Given Lloyds & Co’s track record, advice from them would be best avoided I think.

Thanks (3)
By Penfold
27th Nov 2012 00:09

After sales service

for all other services please hang up

Thanks (3)
By Locutus
26th Nov 2012 11:45

This is why I would seldom, if ever, recommend invoice finance

Although the link below relates specifically to Lloyds TSB Invoice Finance (formerly Alex Lawrie) from several years back, I wouldn't be surprised if the sad tales still apply to the whole invoice finance industry today.


Thanks (0)
26th Nov 2012 12:02

Some perspective, please.

It is rather depressing to keep hearing these negative reactions to what can be a very effective source of working capital, especially but not only for SMEs.

An alternative view?

In 2011, the global factoring (and invoice discounting) industry grew by 25% to a turnover of €2 trillion (yes, that’s 2 with 12 zeros) and provided €300Bn of funding to nearly 500,000 businesses. (IFG GIAR 2011)

In Europe, the turnover was €1.14Trillion. (EUF 2012)

In the UK, the Industry currently provides services to around 43000 businesses and £16Bn of working capital. (ABFA 2012)

Kiss of death? Run for the hills?

I wonder if 500,000 client businesses have got it wrong?

You may also want to consider that

Factoring can give more asset leverage to the client than a traditional lendIt can be more secure both for user and provider (a real win win).Costs should be compared to those of traditional lending, not seen in isolation.

Factoring is not a universal panacea; it is certainly not suitable for all businesses and it will not keep a failing business alive (but may give management time to reorganise).

But it clearly has a viable place in business working capital finance.


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26th Nov 2012 13:29

@round window all I can say is my clients who have ended up with a factor are:

1. Poorly managed, often with debt collection as an afterthought

2. Have a poor business model, low margins etc

3. Make no money with or without the factor

4. *think* they are gods gift to business despite 1 to 3.


Lets face it clients are being charged credit card rates of interest on the borrowing and still hold all the risk which is a pretty dumb thing to get into.

That said there is room for factoring if done right. Some of the key clauses need to be:

1. Choice of which invoices go in

2. No minimum fees

3. No minimum term

This means the firm can use it to cope with growth and other issues but then back out again when needs be. 

This IS possible with some of the independents, but not with the high street banks.

Peer to peer lending is another route of course to bypass the banks on this one.


Thanks (1)
26th Nov 2012 14:51

What are the true costs of Factoring/Invoice Discounting?

My understanding is this...


circa 3% of gross debt for factoring charge (slightly less for invoice discounting)

circa 3% for the insuring of this debt (i.e. Bad Debt Protection)

circa 1% for service charge if done through a broker


For this you would receive approx 80% upfront and the remaning balance (less fees stated above) when the client has paid


Have I missed any charges here?



Thanks (0)
26th Nov 2012 18:14

round window
What is your vested interest

Thanks (3)
to spilly
26th Nov 2012 19:09

the future?

The article headline says "invoice finance is the future".

I think not.

Invoice finance is the next PPI. I expect similar impressive sales stats could have been quoted for that as Roundwindow quoted above for IF.

Peer to peer lending is the future.

Thanks (2)
By Locutus
26th Nov 2012 22:57


Is this relevant to your question?


Thanks (3)
27th Nov 2012 15:39


Member for: 2 years 8 months

Total Posts: 3 - YUP THREE

    Some perspective, please. 26/11/2012 - 12:02
    Factoring- Pros and cons 02/11/2012 - 15:46
    Factoring, Invoice Discounting and Asset Based Lending 15/04/2011 - 20:47

Sole (only) subject of interest - the promotion of "factoring"

Um, confirmed member of the wunch of bankers club, Case Closed

Thanks (3)
27th Nov 2012 10:59

Costs of factoring


CIMA accountant asked what are the true costs of factoring: 

circa 3% of gross debt for factoring charge (slightly less for invoice discounting)

One of the benefits of having over 40 competitors in the market is the effect on pricing. Factoring costs are dependent on turnover, number of debtors, complexity and service required and generally range from  0.5% to 1.5%. Invoice discounting (where the client retains the ledger administration) is now usually in the range 0.2% to 1%.


circa 3% for the insuring of this debt (i.e. Bad Debt Protection)

If you choose to have insurance (and most in the UK don't), the the additional cost will range from 0.3% to 1% depending on cover, structure, industry and territory.


circa 1% for service charge if done through a broker

There are no charges to the client for broker introduction


For this you would receive approx 80% upfront and the remaning balance (less fees stated above) when the client has paid

Once the debtor has paid, correct


Have I missed any charges here 

The factor will charge discount for the monies advanced, typically 2-3.5%/ base or LIBOR but can be less for large deals.

So the fees are not 7% as you imagine, but far more affordable. Given that you have a facility that does not need to be renegotiated if it grows, adjusts to your cash requirements, outsources credt control and ledger adminstration.

Hope ths helps clarfy!



Thanks (0)
27th Nov 2012 12:38

Hidden fees


In my experience the fees for factoring are far from transparent. 

Taking the latest statutory accounts of two of my former clients, modest small companies (who both went into liquidation): -

Client 1 - net amount owed to factoring company £81K.  Factoring costs for year £28K.

Client 2 - net amount owed to factoring company £18K. Factoring costs for year £34K. 

Yes, to essentially borrow £18K cost the client £34K p.a.  The credit control that was supposed to be provided was poor with the client having to do much of the chasing themselves.

As for the reams and reams of unfathomable paperwork it generates....

Thanks (1)
27th Nov 2012 15:06


@roundwindow, the fees are typically 5% I have found taking into account all of them, which if we are talking about bringing forward cash by about 60 days = 30% APR. 

Plus all the extra accounts work to deal with as it makes bookkeeping far harder - time much better spent on simply putting in a decent cash flow cycle in the first place. Ie raising invoices on time, or ahead of time. Reducing credit terms to 14 days not 30 days. Then chasing invoices after 14 days, not 60+ days. All bog basic stuff. 

Whats more the thieving so and so's demand you include things that are normally paid upfront or in 7-14 days!  However much you might defend your industry (as you are clearly an insider) its just not cricket and factors remain the "lender of last resort" for any sensible business. 


Thanks (1)
27th Nov 2012 19:14

its time Round Window

went back to playschool

Thanks (1)
27th Nov 2012 20:47

Meanwhile in Lyme Regis

Lloyds TSB is playing scrooge and refusing to pay £25 for a Christmas Tree



Thanks (0)
28th Nov 2012 17:23



I may have misunderstood your response to my earlier post, are you saying the following charges will apply:-


(1a) Factoring Charge - 0.5% - 1.5%

(1b) Invoice Discounting Charge - 0.2% - 1%

(2) Debt Insurance (Optional) - 0.3% - 1%

(3) Broker fee - Zero (is the charge picked up by the factoring company?)

When I asked if I missed any further charges you responded with "The factor will charge discount for the monies advanced, typically 2-3.5%/ base or LIBOR but can be less for large deals"

Is this in addition to the costs covered in points 1a/b & 2?

So the cost for factoring an insured debt could be up to 6% (1.5%+1%+3.5%)


I'm on the fence at the moment with the value of factoring and interested to hear from both sides the pro's and con's...and I have struggled to get a direct answer in the past for the total costs of factoring but that just may be the companies I have been approached by (will not name on here)




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