This paper studies the benefits and costs of lending specialization along supply chains, where banks serve as common lenders. Using firm-to-firm transaction and credit registry data from Belgium, we show that common lending is persistent and widespread. We develop and estimate a structural model of credit demand and supply in imperfectly competitive markets, where firms are connected through the production network. Our estimation results reveal that firms prefer to borrow from the same bank as their suppliers or customers, which gives common lenders market power and enables them to charge higher markups. At the same time, the network effects of common lending give banks an incentive to offer lower interest rates to maintain their role as common lenders. Exploiting the closure of a large manufacturing plant as an exogenous shock, we show that common lending also creates costs: the shock propagates through the production network, reducing credit demand along the supply chain and among common lenders, with banks more exposed to the affected network experiencing significantly larger declines in lending. A simulated counterfactual shows that the preference for borrowing from common lenders amplifies the propagation of the shock, concentrating the losses on the banks most specialized in the disrupted supply chain.