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Fraudsters are using a new scam to target small firms at networking events, an SME finance provider has warned.

Ashley Business Finance says firms should beware of new business contacts offering to cut them in on a lucrative contract after two small firms lost over £100,000 between them.

In both cases, which involved firms in Wigan and Manchester, the fraudsters claimed to have clinched a major order from a big company which they were unable to fulfill themselves and offered a share of the profits in return for help to buy stock.

Jonathan Cranston, chairman of Ashley Business Finance, said the losses could have been much greater and believes there may be many more similar cases which have not yet come to light.

He said: “In both these cases the fraudsters had infiltrated networking groups, where people tend to assume they are dealing with bona fide businesses.

“They then cleverly use the conversation to identify firms with access to established factoring or invoice finance facilities, and claim to have won a big contract which they are unable to fund themselves. They persuade victims to buy stock and invoice them for it and, to build confidence, may even pay the first invoice.

“These are highly sophisticated fraudsters who catch people off guard, come up with a plausible story and even provide a viable paper trail using the names of real companies and directors who are unaware of what is happening. However frauds such as these can be devastating for small firms.

“Our advice is to beware of deals which may appear too good to be true, always check out the companies concerned and never offer to let others take advantage of your finance facility, no matter how good the deal seems.”

Both cases were reported to Action Fraud, the UK’s national fraud reporting service.