Final answer:
The looped capillaries are located in the papillary layer of the dermis, just beneath the epidermis.
Step-by-step explanation:
Looped capillaries are located in the papillary layer of the skin. This layer is part of the dermis and made of loose, areolar connective tissue which allows for a rich supply of small blood vessels. The papillary layer is situated just beneath the epidermis and it projects into the stratum basale of the epidermis forming finger-like dermal papillae. These papillae contain the looped capillaries and sensory touch receptors. Furthermore, the papillary layer serves as an anchor for the epidermis above it and strengthens the connection between the two skin layers.