Royal Bank of Scotland has £40 billion of undrawn business borrowing facilities and its overdraft applications are down by almost half on four years ago, a business convention in Edinburgh heard yesterday.

Ken Barclay, head of corporate banking in Scotland and chairman of the bank's new Scottish board, said demand for small business funding was unlikely to rise "until we collectively manage down the debt built up over the last decade".

He said: "It is easy to blame the banks, but there is £40bn we are sitting on that businesses could borrow from us but they are not drawing down.

"For overdrafts we had 118,000 applications in the first quarter of 2008 and 62,000 in the first quarter of 2012, a reduction of nearly 50% in four years and I am concerned about that, but I would put it down to lack of confidence about the future."

Mr Barclay was addressing the second national business convention of the Federation of Small Businesses and the Scottish Council Development and Industry, staged in the rolling acres of the RBS headquarters at Gogarburn, symbol of the Fred Goodwin era.

He said the creation of the Scottish board reflected chief executive Steven Hester's aim for "RBS to again become a flagship business in Scotland".

"We have also spent £2bn on third-party contracts in the past three years, helped 67,000 schoolchildren learn about financial management and pumped £3m into local communities."

But Mr Barclay went on: "I am not going to hide from reality, I fully acknowledge mistakes were made in the past and I am sorry for that. We are working with politicians and regulators to ensure what happened to us doesn't happen again."

He said RBS had made more than £2bn available to small and medium enterprises in Scotland last year, by far the biggest amount of any bank, and 90% of overdraft renewals were approved locally.

The bank had 100,000 business customers in Scotland, including 10,000 start-ups in the past year, and had turned round 400 struggling businesses with only 5% in that category going under.

Mr Barclay also cited RBS's support for e-Spark, the start-up incubator project led by Jim Duffy and backed by entrepreneurs including Sir Tom Hunter. "We are supporting it on a whole number of levels and we are the only bank doing this," he said.

Amanda Boyle, creator of Bloom VC (venture catalyst), a Scottish crowd-funding website, said it was already funding start-ups, with small amounts of equity raised online from large numbers of interested backers.

She said Bloom, along with Seedrs, a successful new English crowd-funding site which has regulatory approval for private investors, had failed to attract backing in Scotland.

But US pioneer Kickstarter had already funded 69,000 businesses, and one-third of them had raised less than $10,000, Ms Boyle said.

She told delegates: "What we have done is take a simple idea and harness the power of the internet to enable lots of people to raise small amounts of money to get started."

Simon Munro, chief executive of the independent Business Growth Fund, launched 15 months ago with £2.5bn from the five big banks, said it had completed 14 deals to date and was targeting another 60 by the end of 2013.

It insisted on due diligence reports being only 20 pages long, and was completing deals within 33 days instead of the industry's usual eight months.