This paper examines the conditions under which a borrower's debt contract will be monitored by lenders, specifically between borrowing directly (issuing bonds without monitoring) and borrowing through a bank that monitors to mitigate moral hazard. The analysis provides a theory of bank loan demand and the role of monitoring in scenarios where reputation effects are significant. Key findings include that borrowers with middle credit ratings rely on bank loans, and higher-rated borrowers choose bank loans during periods of high interest rates or low future profitability. The model also explores the "life cycle" effect of borrowing through intermediaries, where new borrowers initially borrow from banks but may later issue debt directly. Monitoring interacts with reputation, and the model abstracts from long-term contracting and lender reputation, focusing on the interaction between borrower reputation and monitoring. The paper discusses the implications for bank loan demand, the quality of new loans, and the dynamics of borrower behavior over time.This paper examines the conditions under which a borrower's debt contract will be monitored by lenders, specifically between borrowing directly (issuing bonds without monitoring) and borrowing through a bank that monitors to mitigate moral hazard. The analysis provides a theory of bank loan demand and the role of monitoring in scenarios where reputation effects are significant. Key findings include that borrowers with middle credit ratings rely on bank loans, and higher-rated borrowers choose bank loans during periods of high interest rates or low future profitability. The model also explores the "life cycle" effect of borrowing through intermediaries, where new borrowers initially borrow from banks but may later issue debt directly. Monitoring interacts with reputation, and the model abstracts from long-term contracting and lender reputation, focusing on the interaction between borrower reputation and monitoring. The paper discusses the implications for bank loan demand, the quality of new loans, and the dynamics of borrower behavior over time.