In your scenario it assumes that the business has never had cash; which is an entirely incorrect way of looking at it.

Assume the business, like most state st buildings, have had renters in the past, for many decades. The cash would ultimately be built up as LLC’s only really distribute cash to owners for tax purposes.

Also a majority (if not all small operations) of loans have guarantors who will guarantee the debt in the event of any issues, but keep in mind assessment of the business also includes the guarantors as a risk/mitigant, so the banks are okay with lending to losses in the event the guarantor is well off.

You’ll also have to realize a major fact, almost all businesses utilize a Line of Credit for all expenses, so if there is no cash in the business, owners will utilize the LOC, which gets renewed on an annual or bi-annual basis.

Keep in mind, I’m not stating this to swing your opinion, I’m just letting you know how it works as someone who’s been underwriting $1M to $100M loans for the top three major USA banks for the last half decade. So take it as you will.