This paper investigates the impact of geographical distance on bank loan rates, focusing on the distance between firms, lending banks, and competing banks. Using a dataset of over 15,000 loans to small firms in Belgium, the study finds that loan rates decrease with the distance between the firm and the lending bank, and increase with the distance between the firm and competing banks. The results suggest that spatial price discrimination is prevalent in bank lending, with transportation costs being the main driver. The study also finds that the number of competing banks and the distance to the closest competitor influence loan rates. The findings highlight the importance of geographical proximity in determining loan conditions and suggest that transportation costs, rather than informational asymmetries, are the primary factor behind spatial price discrimination in bank lending. The study contributes to the literature on price discrimination and provides evidence of the economic relevance of spatial price discrimination in financial contracts. The results have implications for understanding the role of geographical distance in financial markets and the impact of technological advancements on bank lending practices.This paper investigates the impact of geographical distance on bank loan rates, focusing on the distance between firms, lending banks, and competing banks. Using a dataset of over 15,000 loans to small firms in Belgium, the study finds that loan rates decrease with the distance between the firm and the lending bank, and increase with the distance between the firm and competing banks. The results suggest that spatial price discrimination is prevalent in bank lending, with transportation costs being the main driver. The study also finds that the number of competing banks and the distance to the closest competitor influence loan rates. The findings highlight the importance of geographical proximity in determining loan conditions and suggest that transportation costs, rather than informational asymmetries, are the primary factor behind spatial price discrimination in bank lending. The study contributes to the literature on price discrimination and provides evidence of the economic relevance of spatial price discrimination in financial contracts. The results have implications for understanding the role of geographical distance in financial markets and the impact of technological advancements on bank lending practices.