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                                                                    EXHIBIT 10.7

[LOGO]

                        THIRD AMENDMENT TO LOAN AGREEMENT

      This Third Amendment to Loan Agreement ("Amendment") is entered into as of
February __, 2005, by and between CRAFTMADE INTERNATIONAL, INC., a Delaware
corporation ("Borrower"), whose address is 650 South Royal Lane, Coppell, Texas
75019, and THE FROST NATIONAL BANK, a national banking association ("Lender"),
whose address is P.O. Box 1600, San Antonio, Texas 78296.

                                       I.
                                    RECITALS:

      A. Lender is the sole owner and holder of that one certain Revolving
Promissory Note (the "Note") dated November 6, 2001, executed by Borrower and
payable to the order of Lender in the original principal amount of Twenty
Million and No/100 Dollars ($20,000,000.00), as modified by a Modification,
Renewal and Extension Agreement entered into October 27, 2003 (the
"Modification"),

      B. Borrower and Lender entered into a Loan Agreement, dated November 6,
2001, as amended by a First Amendment to Loan Agreement effective as of August
13, 2003, as modified by the Modification and as further amended by the Second
Amendment to Loan Agreement, dated June 14, 2004 (collectively, the "Loan
Agreement").

      C. The Note is secured by a Security Agreement dated November 6, 2001,
between Borrower and Lender, covering certain collateral as more particularly
described therein; a Security Agreement dated November 6, 2001, between Trade
Source International, Inc., a Delaware corporation, and Lender, covering certain
collateral as more particularly described therein; a Security Agreement dated
November 6, 2001, between Durocraft International, Inc., a Texas corporation,
and Lender, covering certain collateral as more particularly described therein;
and a Security Agreement dated November 6, 2001, between Design Trends, LLC, a
Delaware limited liability company, and Lender, covering certain collateral as
more particularly described therein (collectively, the "Security Agreements").
The Note, Loan Agreement, Security Agreements and all modifications, renewals
and extensions described below are hereafter collectively referred to as the
"Loan Documents."

      D. Lender has agreed to further amend the Loan Agreement. For and in
consideration of the premises, Lender and Borrower agree as follows:

                                       II.
                                   AGREEMENTS:

      1. Amendments to Loan Agreement.

      (a) The first three paragraphs of subsection (a) of Section 1 "Credit
Facilities; Interest Rate Options" are hereby deleted in their entirety and
replaced with the following:

THIRD AMENDMENT TO LOAN AGREEMENT

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      (a) (I) Borrowing Base Line of Credit. Subject to the terms and conditions
set forth herein, Lender agrees to lend to Borrower, on a revolving basis from
time to time during the period commencing on the date hereof and continuing
through the maturity date of the promissory note evidencing this Credit Facility
from time to time, such amounts as Borrower may request hereunder; provided,
however, the total principal amount outstanding at any time shall not exceed the
lesser of (i) an amount equal to the Revolving Borrowing Base (as such term is
defined hereinbelow), or (ii) $20,000,000.00 minus the outstanding principal
balance of a $2,000,000.00 Revolving Promissory Note, dated June 14, 2004,
executed by Design Trends, LLC, a Delaware limited liability company, and
payable to the order of Lender (the "Borrowing Base Line of Credit"). If at any
time the aggregate principal amount outstanding under the Borrowing Base Line of
Credit shall exceed an amount equal to the Revolving Borrowing Base (as such
term is defined hereinbelow), Borrower agrees to immediately repay to Lender
such excess amount, plus all accrued but unpaid interest thereon. Subject to the
terms and conditions hereof, Borrower may borrow, repay and reborrow hereunder.
The sums advanced under the Borrowing Base Line of Credit shall be used for
working capital

The term "Revolving Borrowing Base" shall have the meaning set forth
hereinbelow:

An amount equal to 80% of the Borrower's Eligible Accounts, plus 55% of the
Borrower's Eligible Inventory minus the outstanding principal balance of the
Borrowing Base Advance Facility (hereinafter defined); provided, however, the
outstanding amount Advanced against Eligible Inventory at any time shall not
exceed 50% of total outstanding Advances (herein so called) under the Borrowing
Base Line of Credit.

          (II) Borrowing Base Advance Facility. Subject to the terms and
conditions set forth herein, Lender agrees to lend to Borrower, on a
non-revolving basis from time to time during the period commencing on the date
hereof and continuing through the maturity date of the promissory note
evidencing this Credit Facility from time to time, an aggregate amount not to
exceed $3,000,000.00 in a single advance or in multiple advances, as may be
requested by Borrower from time to time; provided, however, the total principal
amount outstanding at any time shall not exceed the lesser of (i) an amount
equal to the Advancing Borrowing Base (as such term is defined hereinbelow), or
(ii) $3,000,000.00 (the "Borrowing Base Advance Facility"). Borrower shall not
be allowed to reborrow under the Borrowing Base Advance Facility after a
repayment. All sums advanced under the Borrowing Base Advance Facility shall be
used to finance the purchase of Bill Teiber Company, Inc.

The term "Advancing Borrowing Base" shall have the meaning set forth
hereinbelow:

An amount equal to 80% of the Borrower's Eligible Accounts, plus 55% of the
Borrower's Eligible Inventory minus the outstanding principal balance of the
Borrowing Base Line of Credit; provided, however, the outstanding amount
Advanced against Eligible Inventory at any time shall not exceed 50% of total
outstanding Advances (herein so called) under the Borrowing Base Advance
Facility.

THIRD AMENDMENT TO LOAN AGREEMENT

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      (b)   Subsection (b)(ii) of Section 1 "Credit Facilities; Interest Rate
Options" is hereby deleted in its entirety and replaced with the following:

            (ii) The lesser of (x) a rate equal to the London Interbank Offered
            Rate (as defined below) plus the following percentage based on
            Borrower's "Debt to Worth Ratio" set forth in Paragraph 9(a) below:

<TABLE>
<CAPTION>
Percentage       Debt to Worth Ratio
----------   ---------------------------
<S>          <C>
   2.75%     >=3.0 to 1.0
   2.25%     >=2.5 to 1.0 or <3.0 to 1.0
   1.75%     >=2.0 to 1.0 or <2.5 to 1.0
   1.50%     < 2.0 to 1.0
</TABLE>

            as adjusted provided below, or (y) the highest rate permitted by
            applicable law, but in no event shall interest exceed the maximum
            interest permitted by law ("Libor Rate Option").

            As used herein, the "London Interbank Offered Rate" shall mean with
            respect to any Interest Period (defined below), the rate of interest
            per annum (rounded to the nearest 1/16 of 1% -- and if the rate is
            equidistant to the lower and higher nearest 1/16 of 1%, rounded
            upwards to the nearest 1/16 of 1%) quoted in U.S. Dollars by the
            British Bankers' Association at approximately 11:00 a.m. London time
            on the first day of such Interest Period on which deposits in
            immediately available funds are offered to first class banks in the
            interbank eurodollar market (as determined by Lender in its sole
            discretion), such deposits being for a three (3) month period
            ("Interest Period"), and in amounts equal to or comparable to the
            amount of the Advance. In the event that the London Interbank
            Offered Rate is no longer published or reported as specified above,
            then the Lender shall use the rate of interest published in The Wall
            Street Journal (Central Edition) in the "Money Rates" section as the
            "London Interbank Offered Rates (LIBOR)" for a period of time equal
            or comparable to the applicable Interest Period, as of five Business
            Days preceding the date of the Advance. Each determination by Lender
            of the London Interbank Offered Rate shall be conclusive and
            binding, absent manifest error, and may be computed using any
            reasonable averaging and attribution method.

      (c)   The following subsections of Section 9 "Financial Covenants" are
hereby deleted in its entirety and replaced with the following:

            (a) Debt to Worth Ratio. Borrower will maintain, at all times, a
            ratio of (a) total liabilities (excluding any Subordinated Debt), to
            (b) Tangible Net Worth of not greater than 4.5 to 1.0; and 4.0 to
            1.0 beginning June 30, 2005; and 3.5 to 1.0 beginning September 30,
            2005; and 3.0 to 1.0 beginning December 31, 2005 and thereafter,
            tested quarterly. If Borrower's Debt to Worth Ratio exceeds 3.0 to
            1.0 then Borrower will not make any stock repurchases.

THIRD AMENDMENT TO LOAN AGREEMENT

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            (c) Fixed Charge Coverage Ratio. Borrower will maintain, as of the
            end of each fiscal quarter, a ratio of (a) net income after taxes
            plus depreciation, amortization, other non-cash expenses and
            interest expense for the 4 most recently completed quarters ending
            with such fiscal quarter to (b) interest expense, dividends and
            capital expenditures and current portion of long-term debt for such
            4 quarter period, of not less than 1.50 to 1.0.

      (d) The following subsections of Section 10 "Reporting Requirements" are
hereby deleted in their entirety and replaced with the following:

            (c) Compliance Certificate. A certificate signed by the Chief
            Financial Officer of Borrower within forty five (45) days after the
            end of each quarter of each fiscal year of Borrower, stating that
            Borrower is in full compliance with all of its obligations under
            this Loan Agreement and all other Loan Documents and is not in
            default of any term or provisions hereof or thereof, and
            demonstrating compliance with all financial ratios and covenants set
            forth in the Loan Agreement.

            (d) Borrowing Base Report. A borrowing base report for the Revolving
            Borrowing Base and the Advancing Borrowing Base signed by the Chief
            Financial Officer of Borrower within thirty (30) days after the end
            of each month of each fiscal year, in form and detail satisfactory
            to Lender.

            (g) 10Q Filings. Borrower's quarterly 10Q filing with the Securities
            and Exchange Commission within forty five (45) days after the end of
            each quarter of each fiscal year of Borrower.

      2. Reaffirmation of Representations, Etc. Borrower hereby reaffirms to
Lender each of the representations, warranties, covenants and agreements of
Borrower set forth in the Loan Documents.

      3. Enforceable Obligations. Borrower hereby ratifies, affirms, reaffirms,
acknowledges, confirms and agrees that the Loan Documents represent valid and
enforceable obligations of Borrower, and Borrower further acknowledges that
there are no existing claims, defenses, personal or otherwise, or rights of
setoff whatsoever with respect to the Note, and Borrower further acknowledges
and represents that no event has occurred and no condition exists which would
constitute a default under the Loan Documents or this Amendment, either with or
without notice or lapse of time, or both.

      4. No Release of Liens. This Amendment in no way acts as a release or
relinquishment of the liens, security interests and rights (the "Liens") created
or evidenced by the Loan Documents. The Liens are hereby ratified and confirmed
by Borrower in all respects and are extended to secure (i) the principal amount
of the Note, (ii) all interest, charges and other sums payable with respect
thereto, and (iii) the performance of all other obligations under the Loan
Documents.

THIRD AMENDMENT TO LOAN AGREEMENT

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      5. Additional Renewals and Extensions. Notwithstanding anything to the
contrary contained herein or inferred hereby or in any other instrument executed
by Borrower or in any other action or conduct undertaken by Borrower on or
before the date hereof, the agreements, covenants and provisions contained
herein shall constitute the only evidence of Lender's consent to amend the terms
and provisions of the Loan Documents in the manner set forth herein. No express
or implied consent to any further amendments and/or modifications involving any
of the matters set forth in this Amendment or otherwise, shall be inferred or
implied from Lender's execution of this Amendment. Further, Lender's execution
of this Amendment shall not constitute a waiver (either express or implied) of
the requirement that any further amendments and/or modifications of the Loan
Documents shall require the express written approval of Lender, no such approval
(either express or implied) having been given as of the date hereof.

      6. Miscellaneous. (a) As modified hereby, the provisions of the Loan
Agreement and Note shall continue in full force and effect, and the Borrower
acknowledges and reaffirms its liability to Lender thereunder. In the event of
any inconsistency between this Amendment and the terms of the Loan Documents,
this Amendment shall govern.

      (b) Borrower hereby agrees to pay all costs and expenses incurred by
Lender in connection with the execution and administration of this Amendment and
the modification of the Loan Documents including, but not limited to, all
appraisal costs, title insurance costs, legal fees incurred by Lender and filing
fees.

      (c) Any default by Borrower in the performance of its obligations herein
contained shall constitute a default under the Loan Documents and shall allow
Lender to exercise all of its remedies set forth in the Loan Documents.

      (d) Lender does not, by its execution of this Amendment, waive any rights
it may have against any person not a party to this Amendment.

      (e) In case any of the provisions of this Amendment shall for any reason
be held to be invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and this Amendment
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.

      (f) This Amendment and the Loan Documents shall be governed and construed
according to the laws of the State of Texas (without regard to any conflict of
laws principles) and the applicable laws of the United States.

      (g) This Amendment shall be binding upon and inure to the benefit of
Lender, Borrower and their respective successors, assigns and legal
representatives.

      (h) Borrower hereby acknowledges and agrees that it has entered into this
Amendment of its own free will and accord and in accordance with its own
judgment after advice of its own legal counsel, and states that it has not been
induced to enter into this Amendment by any

THIRD AMENDMENT TO LOAN AGREEMENT

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statement, act or representation of any kind or character on the part of the
parties hereto, except as expressly set forth in this Amendment.

      (i) This Amendment may be executed in multiple counterparts, each of which
shall constitute an original instrument, but all of which shall constitute one
and the same agreement.

      (j) Except as modified herein, all other terms, conditions and provisions
of Loan Documents shall remain in full force and effect as of the date thereof
and Borrower acknowledges and reaffirms its liability to Lender thereunder.

                                      BORROWER:

                                      CRAFTMADE INTERNATIONAL, INC.,
                                      a Delaware corporation

                                      By: /s/ James R. Ridings
                                          --------------------------------------
                                          James R. Ridings, President

                                      LENDER:

                                      THE FROST NATIONAL BANK,
                                      a national banking association

                                      By:
                                          --------------------------------------
                                          D. Michael Randall, Sr. Vice President

                       Guarantor Ratification of Amendment

      By executing this Amendment, DUROCRAFT INTERNATIONAL, INC., a Texas
corporation; TRADE SOURCE INTERNATIONAL, INC., a Delaware corporation; DESIGN
TRENDS, LLC, a Delaware limited liability company; and C/D/R INCORPORATED, a
Delaware Corporation as Guarantors of the indebtedness evidenced by the Note, as
set forth in Guaranty Agreements (collectively, the "Guarantys") dated November
6, 2001, hereby expressly agree (a) to all of the terms and provisions of this
Amendment, (b) to the continuing validity of the Guarantys and all duties and
obligations thereunder, (c) that their liability under the Guarantys shall not
be reduced, altered, limited, lessened or in any way affected by the execution
and delivery of this Amendment by the parties hereto, and (d) that the Guarantys
shall remain in full force and effect and enforceable in accordance with their
terms.

                                                 DUROCRAFT INTERNATIONAL, INC.,
                                                 a Texas corporation

                                                 By: /s/ Brad Heimann
                                                     --------------------------
                                                     Brad Heimann, Secretary

THIRD AMENDMENT TO LOAN AGREEMENT

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                                         TRADE SOURCE INTERNATIONAL, INC.,
                                         a Delaware corporation

                                         By: /s/ Brad Heimann
                                             ----------------------------------
                                             Brad Heimann, Secretary

                                         DESIGN TRENDS, LLC,
                                         a Delaware limited liability company

                                         By: Craftmade International, Inc.,
                                             a Delaware corporation, Manager

                                         By: /s/ James R. Ridings
                                             ----------------------------------
                                             James R. Ridings, President

                                         C/D/R INCORPORATED,
                                         a Delaware corporation

                                         By: /s/ Clifford Crimmings
                                             ----------------------------------
                                             Clifford Crimmings, V.P. Marketing

                 Ratification of Continuing Pledge of Collateral

      By executing this Amendment, Borrower; DUROCRAFT INTERNATIONAL, INC., a
Texas corporation; TRADE SOURCE INTERNATIONAL, INC., a Delaware corporation; and
DESIGN TRENDS, LLC, a Delaware limited liability company expressly agree (a) to
the continuing validity of the Security Agreements, (b) that their pledge of
collateral shall be not reduced, altered, limited, lessened or in any way
affected by the execution and delivery of this Amendment by the parties hereto,
and (d) that the Security Agreements shall remain in full force and effect and
enforceable in accordance with their terms.

                                         CRAFTMADE INTERNATIONAL, INC.,
                                         a Delaware-corporation

                                         By: /s/ James R. Ridings
                                             ----------------------------------
                                             James R. Ridings, President

                                         DUROCRAFT INTERNATIONAL, INC.,
                                         a Texas corporation

                                         By: /s/ Brad Heimann
                                             ----------------------------------
                                             Brad Heimann, Secretary

THIRD AMENDMENT TO LOAN AGREEMENT

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                                         TRADE SOURCE INTERNATIONAL, INC.,
                                         a Delaware corporation

                                         By: /s/ Brad Heimann
                                             ----------------------------------
                                             Brad Heimann, Secretary

                                         DESIGN TRENDS, LLC,
                                         a Delaware limited liability company

                                         By: Craftmade International, Inc.,
                                             a Delaware corporation, Manager

                                         By: /s/ James R. Ridings
                                             ----------------------------------
                                             James R. Ridings, President

THIRD AMENDMENT TO LOAN AGREEMENT

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