Developer Byong Yu saw an opportunity to revamp a down-on-its-heels shopping center in Rancho Cordova into an economic driver and job engine in tough times.

Yu had both the vision and the track record to see his $21 million Koreana Plaza Market project through – he had successfully launched a similar retail center in Oakland. But he needed to find millions more in cash, a difficult task in this era of tight credit.

That's where the U.S. Small Business Administration's 504 loan program came in. Yu received an SBA-backed loan of more than $3 million that pushed his project over the top.

The SBA's 504 program isn't new – it was created in 1980 to provide financing for growing small- and medium-size businesses – but it's gaining momentum with both lenders and business owners.

"There's more buzz on the street" over the loans, said Michael Curtin, a senior business development officer at North Highlands-based SAFE Credit Union, and an expert in small business lending.

Federal guarantees of up to 90 percent on loans "make it easier for lenders to get involved. The bank's exposure is less," Curtin said.

Businesses find the loans attractive because they are long term and allow them to put as little as 10 percent down.

Add a buyer's market for commercial real estate into the picture, and it's easy to see why 504 loan activity has been brisk at SAFE and other lenders.

"It's a great example of a project enabling a company that is growing and successful to continue to expand and hire more people," said Barbara Morrison, chief executive officer of Bay Area lender TMC Development, the certified development company that brokered the deal for Yu's Koreana project.

Certified development companies or CDCs are private corporations certified and regulated by SBA to make SBA 504 loans in a specific geographic area. There are approximately 250 CDCs nationwide.

Morrison, whose TMC Development is a major 504 lender in Northern California, Los Angeles and Las Vegas, said she has seen 504 loan activity rise at her firm by about half from fiscal 2010.

By the end of the 2011 fiscal year in September, her firm had granted 304 loans leading to more than $706 million in projects, she said.

And, in Yu's case – a loan financing both acquisition and construction – the 504 program stepped in where other lenders might not, Morrison said.

"That's difficult to finance today," she said. "Lenders are reticent."

But Yu's ambitious project is moving ahead at full speed. On Tuesday, workers wielded power saws and steered earth movers inside what will be a vastly expanded Koreana Market.

The market's footprint will more than double to 78,000 square feet from its present 30,000 square feet, an expansion Yu says will create nearly 90 more jobs.

When the store opens, much of the expanded floor space will reflect the tastes of ethnic Rancho Cordova, with a wide selection of Asian, Latino and Eastern European offerings.

In his office overlooking the Koreana market floor, Yu's voice elevates with excitement as he looks over the blueprints. There will be a 17,000-square-foot food court; 7,000 square feet dedicated to local produce; a live fish market; an in-market tortilleria; and an Eastern European-style delicatessen he boasts will be the "biggest in Sacramento County."

Yu expects the expansion to be complete in March 2012.

"I want a gathering place where something's happening. That's what I'm trying to make here. We need to exchange our food culture," said Yu, who emigrated to the U.S. from Korea in 1977. "People aren't just buying food anymore, they're also buying for pleasure. I want to introduce Asian food to Europeans and Americans; European food to Koreans."

The loan funded a 16 percent down payment on the project and set the wheels in motion for the expansion, Yu said. He concedes there are risks in expanding in a down economy, but believes the timing is right to grow his business.

"There's a lot of risk, but I'm a businessman. If I don't go for the risk, it's never going to happen," he said. "A lot of people think 'It's a bad economy, bad timing,' but this is a good time. Shoppers are looking for a place to save money."

That thinking appears to be driving 504 traffic across the region, said SBA Sacramento District director Jim O'Neal. Though the numbers of 504 loans granted in the district were down slightly year-over-year, the loans were "significantly up in dollars," he said.

The Sacramento SBA awarded 134 loans in its fiscal 2011, which ended Sept. 30, nine fewer than the previous fiscal year. But its total of $79.14 million outpaced 2010's $62.8 million and represents back-to-back years of growth in total loan dollars.

James Bryant, the Sacramento SBA's deputy director, said the upswing in total loan dollars "is attributed to a somewhat improved economy, attractive prices on buildings available to purchase, and shift from smaller buyers to more seasoned firms that survived the recession, have begun to expand, and need larger facilities."

That's good news, O'Neal said. Businesses are investing in buildings and equipment for the longer term.

"It shows the market is rebounding," O'Neal said. "With lower real estate prices and interest, business are taking advantage of the rates to consolidate activity." And, O'Neal added, "There are a lot of deals in the pipeline."

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