City regulators have been handed a dossier of evidence compiled by an adviser to Vince Cable which claims that Royal Bank of Scotland was deliberately wrecking viable small businesses to make profits for the bailed out bank.

The business secretary – a long-time critic of the banking industry's lending practices – said some of the allegations were so serious that he had handed the report, compiled by businessman Lawrence Tomlinson, to the regulators and the bank. It has also been given to Sir Andrew Large, a former deputy governor of the Bank of England, whose report on lending failures by RBS will also be released on Monday.

Tomlinson, appointed by Cable as "entrepreneur in residence", has compiled evidence from hundreds of businesses which have approached him after ending up in the bank's global restructuring group (GRG), and subsequently had their properties sold to its specialist property arm, West Register.

"There are many devastating stories of how RBS has wrecked good businesses and the ruinous impact this has on the lives of the business owners," said Tomlinson.

His redacted report, which removes the names of the businesses, also calls for RBS and Lloyds Banking Group to be broken up into six banks with a 10% market share to foster competition on the high street.

The accusations centre on the reasons businesses are referred to the GRG arm, run by the veteran banker Derek Sach, and the process by which West Register ends up taking control of some of the properties.

RBS argues that most of the businesses that end up in GRG are successfully turned around. It has promised to review the allegations made by customers.

Tomlinson, who initially posted requests for ideas on lending on the professional networking site Linked-In, cited "shocking examples of business owners being confronted with last minute demands for information and money" that forced businesses into financial difficulty. One business said dealing with GRG had cost them £256,000 while another claims it had to hand over £40,000 immediately to carry on borrowing from the bank.

These claims have yet to be confirmed. Businesses found themselves referred to GRG because the bank considered the value of their property had fallen or because of technical breaches of loan terms, such as late filing of information.

"The profit-making nature of GRG significantly undermines its position as a turnaround division, in which good businesses should be restructured and returned to normal banking. The temptation to get hold of assets and take additional profit from these businesses to boost GRG's balance sheet is clear," said Tomlinson, a Leed-based entrepreneur.

"From the cases I have heard, it is clear that a perception has arisen that the intention is to purposefully distress businesses to put them in GRG and subsequently take their assets for the West Register at a discounted price. This needs to be addressed and the conflict of interest removed," he said.

Cable, who did not commission the report, said: "Some of these allegations are very serious and I am waiting for an urgent response as to what actions have been taken. I am however confident that the new management of RBS is aware of this history and is determined to turn RBS into a bank that will support the growth of small and medium sized businesses."

Stephen Hester, who ran the bank for almost five years after its £45bn bailout, left in October and was replaced by New Zealander Ross McEwan. The bank said on Sunday: "In the boom years leading up to the financial crisis, the over-heated property development market became a major threat to the UK economy RBS did more than its fair share to fuel this and commercial property lending was one of the key drivers of our near collapse as valuations rapidly plummeted."