Updated the domain model with entities, repos and domain services. Looks good. I think I addressed all the user stories however if I fell short we'll revise as needed.

LibraryApp.Domain/Services/LendingService.cs

@@ -0,0 +1,49 @@
+using LibraryApp.Domain.Entities;
+using LibraryApp.Domain.Repositories;
+
+namespace LibraryApp.Domain.Services;
+
+public class LendingService
+{
+    private readonly ILendRecordRepository _lendRecords;
+
+    public LendingService(ILendRecordRepository lendRecords)
+    {
+        _lendRecords = lendRecords;
+    }
+
+    public async Task<Result<LendRecord>> LendBookAsync(BookInstance bookInstance, Member member)
+    {
+        if (bookInstance.Status != BookInstanceStatus.OnShelf)
+            return Result<LendRecord>.Failure($"Book is not available for lending. Current status: {bookInstance.Status}.");
+
+        var code = await GenerateUniqueLendCodeAsync();
+        bookInstance.MarkAsLent();
+        var record = new LendRecord(bookInstance.Id, member.Id, code);
+        return Result<LendRecord>.Success(record);
+    }
+
+    public Task<Result> ReturnBookAsync(BookInstance bookInstance, LendRecord lendRecord)
+    {
+        if (bookInstance.Status != BookInstanceStatus.Lent)
+            return Task.FromResult(Result.Failure($"Book is not currently lent out. Current status: {bookInstance.Status}."));
+
+        bookInstance.ReturnToShelf();
+        lendRecord.MarkAsReturned();
+        return Task.FromResult(Result.Success());
+    }
+
+    private async Task<LendCode> GenerateUniqueLendCodeAsync()
+    {
+        const string chars = "ABCDEFGHIJKLMNOPQRSTUVWXYZ0123456789";
+        var random = Random.Shared;
+
+        while (true)
+        {
+            var code = new string(Enumerable.Range(0, 6).Select(_ => chars[random.Next(chars.Length)]).ToArray());
+            var lendCode = new LendCode(code);
+            if (!await _lendRecords.ExistsWithCodeAsync(lendCode))
+                return lendCode;
+        }
+    }
+}