To unlock the second loop you must collect envelopes dropped by various King of Fighters characters in the five stages of the game. The first four can be collected during any playthrough and as long as you've done this, you can get the final one using stage select. When you go to collect the fifth envelope, you must finish the entire stage and boss without dying. After this is accomplished you will play through all the stages again on a harder difficulty and there will be an alternate final boss after the boss of the fifth stage is complete.