OK. I think I see what you mean by loaners and sellers (although, as I said, that terminology was not used).

For all practical purposes of understanding the situation, assume that any loan that a bank gives to 1 contractor goes to one other business. In reality, the loan goes to pay for employees, business expenses to multiple businesses, stays on hand for petty cash, etc. However, at the end of the day, the vast majority of the capital winds up back in the banks.

Even if 80% is re-deposited back into banks, you still have money multiplication, just not at the extreme end if 100% was re-deposited. See @sigmajin's example where some of the cash was kept on hand from various businesses.

For the purpose of instruction, aggregating totals of payments of a business into a single entity (when the practical mathematics are the same) is easier to explain the mathematics of an infinite geometric series.