This paper extends a screening model in financial intermediation and provides a model for the choice of financing sources between bank loans and finance loans. This paper incorporates the positive marginal rents or mark-up of a seller in a monopolistically competitive products (capital goods) market into the equilibrium loan contracts in a perfectly competitive loan market and examines borrower’s choice of different financing sources. When the sale of differentiated products is tied to financing and the additional sale of product extracts positive marginal rents, a captive finance company offers a pooling loan contract with higher loan rate and approval rate. A pooling finance loan contract needs to be subsidized by the additional sale of products to be sustainable. Banks offer separating low- and high-risk loan contracts. A low-risk borrower is indifferent between a separating bank low-risk loan contract and a pooling finance loan contract while a high-risk borrower strictly prefers a pooling finance loan contract to a separating bank high-risk loan contract. Hence, the model successfully explains the prevailing wisdom in lending practices and previous empirical findings that on average finance companies service a riskier pool of borrowers, offering more lenient loan approval rates and higher loan rates, than banks do. In addition, this paper shows the interaction between the product and debt markets in that the effective number of buyers in the monopolistically competitive products market is determined by the number of borrowers approved for loans in the debt market.