<PAGE>   1

                                                             Exhibit 10.38

                                 FIRST AMENDMENT


         FIRST AMENDMENT (the "First Amendment") dated as of October 31, 1997 to
Guaranty Agreement dated as of October 1, 1990 (the "First Agreement") among
Retailer Funding Corporation (the "Company"), Keyboard Acceptance Corporation
(formerly BPO Finance Corporation) ("KAC"), Baldwin Piano & Organ Company
("Baldwin") and General Electric Capital Corporation (the "Guarantor"). Except
as otherwise defined herein, capitalized terms used herein and defined, either
directly or by reference in the Purchase and Administration Agreement shall be
used herein as so defined.

                              W I T N E S S E T H :
                              ---------------------


         WHEREAS, the Company, KAC, Baldwin and the Guarantor have entered into
the Guaranty Agreement and now desire to amend certain of the provisions
thereof:

         NOW, THEREFORE, it is agreed:

                  Section 8 of the Guaranty Agreement is hereby amended by
adding a new paragraph at the end thereof which reads as follows:

                  "In order to provide the Guarantor with assurance as to the
                  performance by Baldwin and KAC of their reimbursement
                  obligations hereunder, Baldwin shall deliver to Guarantor on
                  or prior to October 31, 1997, and cause to be maintained in
                  effect from time to time thereafter, an irrevocable letter of
                  credit (the "Guaranty Reimbursement Letter of Credit") naming
                  the Guarantor as beneficiary and permitting the Guarantor to
                  make drawings thereunder from time to time, in an aggregate
                  principal amount not less than 2% of the Outstanding Principal
                  Receivables as of the earlier of (x) the Settlement Date in
                  the calendar month preceding the date of the related payment
                  under the Guaranty and (y) the Wind- Down Date, for amounts
                  required to be reimbursed to the Guarantor under this Guaranty
                  Agreement that are not so reimbursed on or prior to the tenth
                  day following the due date therefor. Such Guaranty
                  Reimbursement Letter of Credit shall be in form and substance
                  satisfactory to the Guarantor and shall be issued by The Fifth
                  Third Bank, NBD Bank, N.A. or another banking institution
                  approved by Guarantor."

         This First Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Guaranty 
Agreement.


                                        1

<PAGE>   2
         This First Amendment shall become effective (the "Amendment Effective
      Date") on the date on which the Company, KAC, Baldwin and GECC shall have
      each executed and delivered to the other a counterpart of this First
      Amendment.

         From and after the Amendment Effective Date, all references to the
      Guaranty Agreement in the Guaranty Agreement, each of the other Company
      Documents and each of the Seller Documents shall be deemed to be
      references to the Purchase and Administration Agreement as amended hereby.

         This First Amendment may be executed on separate counterparts by the
      parties hereto, each of which when so executed and delivered shall be an
      original, but all of which shall constitute one and the same instrument.

         This First Amendment and the rights and obligations hereunder shall be
      construed in accordance with and governed by the laws of the State of New
      York.

         IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
      of this First Amendment to be duly executed and delivered as of the date
      first above written.

                                         RETAILER FUNDING CORPORATION



                                         By /s/ Anne C. Brennan
                                            ---------------------------------- 
                                         Title: Secretary


                                         KEYBOARD ACCEPTANCE CORPORATION
                                         (formerly BPO Finance Corporation)



                                         By /s/ Goerge B. Huebner
                                            ---------------------------------- 
                                         Title: President


                                         BALDWIN PIANO & ORGAN COMPANY



                                         By /s/ Perry H. Schwartz
                                            ---------------------------------- 
                                         Title: Executive Vice President



                                        2

<PAGE>   3


                                          GENERAL ELECTRIC CAPITAL
                                          CORPORATION


                                          By   /s/ Harold Goehl
                                            ---------------------------------- 
                                          Title: Attorney-in-fact


                                        3