SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT


         This  SECOND   AMENDMENT   TO  LOAN  AND   SECURITY   AGREEMENT   (this
"Amendment"),  dated as of May 13, 1999, is among THE LEATHER  FACTORY,  INC., a
Delaware  corporation,  THE LEATHER  FACTORY,  INC.,  a Texas  corporation,  THE
LEATHER FACTORY,  INC., an Arizona corporation,  HI-LINE LEATHER & MANUFACTURING
COMPANY, a California  corporation and ROBERTS,  CUSHMAN & COMPANY,  INC., a New
York  corporation  (hereinafter  referred  to  individually  as  "Borrower"  and
collectively  as  "Borrowers"),  and  FINOVA  CAPITAL  CORPORATION,  a  Delaware
corporation ("FINOVA").

                                 R E C I T A L S
                                 ---------------

         A.  Borrowers  and FINOVA are  parties to a certain  Loan and  Security
Agreement dated as of November 21, 1997, as amended by that certain Amendment to
Loan and Security Agreement dated as of May 13, 1998 (as the same may be further
amended, restated, supplemented or otherwise modified, the "Loan Agreement").

         B.  Borrowers  and FINOVA  desire to amend the Loan  Agreement  to make
certain  changes in the covenants  and to correct  certain  matters,  all as set
forth below.

         NOW,  THEREFORE,  in consideration of the mutual  agreements  contained
herein,  and subject to the terms and  conditions  hereof,  Borrowers and FINOVA
agree as follows:

         1.  Definitions.  All capitalized  terms used but not elsewhere defined
herein  shall have the  respective  meanings  ascribed to such terms in the Loan
Agreement, as amended by this Amendment.

         2.  Amendments to Loan  Agreement.   Section  6.1.13  (Financial  
Covenants) of the Schedule to the Loan  Agreement is hereby amended as set forth
below:

                  (a) Senior Debt Service  Coverage  Ratio is hereby  deleted in
its entirety and the following is substituted in lieu thereof:

                           Senior Debt Service  Coverage  Ratio.  As of the last
                  day  of  each  calendar  quarter  ended  March  31,  June  30,
                  September  30 or  December  31  commencing  with the  calendar
                  quarter  ended  June  30,  1998,   Borrower's  Operating  Cash
                  Flow/Actual for the  consecutive  12-month period ending as of
                  such last day must be at least 1.35 times the amount necessary
                  to meet Borrower's  Senior  Contractual  Debt Service for such
                  12-month  period;   provided  however,  with  respect  to  the
                  consecutive 12-month period ending March 31, 1999,  Borrower's
                  Operating  Cash  Flow/Actual  must be at least  1.25 times the
                  amount  necessary to meet Borrower's  Senior  Contractual Debt
                  Service for such 12-month period; provided however, that, with
                  respect to the  calculations  set forth  herein for the period
                  from  March 1, 1998  through  December  31,  1998,  Borrower's
                  Operating Cash Flow/Actual and Senior Contractual Debt Service
                  shall be determined  beginning as of March 1, 1998 (the "Start
                  Date") and be measured  as  follows:  (x) the time period from
                  the  Start  Date  through  June  30,  1998,  shall be for such
                  amounts  for such  period,  (y) the time period from the Start
                  Date through September 30, 1998, shall be for such amounts for
                  such  period,  and (z) the time  period  from the  Start  Date
                  through  December 31, 1998, shall be for such amounts for such

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                  period;  and, provided further,  that all such  determinations
                  shall be made on a consolidated basis.

                  (b) Total Debt Service Coverage Ratio is hereby deleted in its
entirety and the following is substituted in lieu thereof:

                           Total Debt Service Coverage Ratio. As of the last day
                  of each calendar quarter ended March 31, June 30, September 30
                  or December 31 commencing with the calendar quarter ended June
                  30,  1998,  Borrower's  Operating  Cash  Flow/Actual  for  the
                  consecutive 12-month period ending as of such last day must be
                  at least 1.10 times the amount  necessary  to meet  Borrower's
                  Total  Contractual  Debt  Service  for such  12-month  period;
                  provided  however,  with respect to the  consecutive  12-month
                  period  ending  March  31,  1999,  Borrower's  Operating  Cash
                  Flow/Actual  must be at least 1.05 times the amount  necessary
                  to meet Borrower's Total  Contractual Debt Service for such 12
                  month  period;  provided  however,  that,  with respect to the
                  calculations  set forth  herein for the  period  from March 1,
                  1998,  through  December 31, 1998,  Borrower's  Operating Cash
                  Flow/Actual  and  Total  Contractual  Debt  Service  shall  be
                  determined  beginning  as of the Start Date and be measured as
                  follows:  (x) the time period from the Start Date through June
                  30, 1998,  shall be for such amounts for such period,  (y) the
                  time period from the Start Date  through  September  30, 1998,
                  shall be for such  amounts  for such  period  and (z) the time
                  period from the Start Date through December 31, 1998, shall be
                  for such amounts for such period; and, provided further,  that
                  all such determinations shall be made on a consolidated basis.

         3. Conditions to  Effectiveness.  The  effectiveness  of this Amendment
shall be subject to the  satisfaction  of all of the  following  conditions in a
manner, form and substance satisfactory to FINOVA:

                  (a) Representations and Warranties. All of the representations
         and  warranties of Borrowers set forth in the Loan  Documents  shall be
         true and correct in all material respects.

                  (b)  Approvals.  The approval  and/or  consent shall have been
         obtained  from all persons  whose  approval or consent is  necessary or
         required  to enable  Borrowers  to enter  into this  Amendment  and the
         documents delivered in connection herewith and therewith and to perform
         its obligations hereunder and thereunder;

                  (c)  Material  Adverse  Change.  No event shall have  occurred
         since  December 31, 1998 which has had or reasonably  could be expected
         to have a material adverse effect.

                  (d)  Performance;   No  Default.   Each  Borrower  shall  have
         performed and complied with all agreements and conditions  contained in
         the Loan Documents to be performed by or complied with by such Borrower
         prior to the date hereof, and no Event of Default then shall exist.

                  (e)  Proceedings  and  Documents.   All  corporate  and  other
         proceedings  in  connection  with the  execution  and  delivery of this
         Amendment  by Borrowers  shall be  satisfactory  to FINOVA,  and FINOVA
         shall have  received  all such  counterpart  originals  or certified or
         other copies of evidence of such as FINOVA may request.

                  (f) Payment of Fees and  Expenses.  Borrowers  shall have paid
         all fees and  expenses  of  FINOVA  incurred  in  connection  with this
         Amendment,  including,  without  limitation,  (i)  attorneys'  fees and
         expenses and (ii) $1,500 amendment fee.

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         4. References. From and after the Effective Date, all references in the
Loan Agreement to (i) the "Loan and Security Agreement" shall be deemed to refer
to the Loan  Agreement  as amended  hereby  and (ii) a term  defined in the Loan
Agreement  shall be  deemed to refer to such  defined  term as  amended  by this
Amendment.

         5. Representations and Warranties.

                  (a)  Each  Borrower   hereby   confirms  to  FINOVA  that  the
         representations  and  warranties  set  forth in  Section  5 of the Loan
         Agreement,  as amended by this  Amendment,  are true and correct in all
         material  respects  as of the date  hereof,  and  shall be deemed to be
         remade as of the date hereof.

                  (b)  Each Borrower represents and warrants to FINOVA that:

                           (i) such  Borrower  has full power and  authority  to
                  execute  and  deliver  this  Amendment  and  to  perform  such
                  Borrower's obligations hereunder,

                           (ii) upon the  execution  and delivery  hereof,  this
                  Amendment  will be valid,  binding and  enforceable  upon such
                  Borrower in accordance with its terms,

                           (iii) the  execution  and delivery of this  Amendment
                  does not and will not  contravene,  conflict with,  violate or
                  constitute  a default  under (A) the Loan  Agreement,  (B) any
                  Loan  Document,  (C) any  applicable  law,  rule,  regulation,
                  judgment,  decree  or order  or any  agreement,  indenture  or
                  instrument  to which such  Borrower  is a party or is bound or
                  which is binding upon or  applicable  to all or any portion of
                  such Borrower's property,

                           (iv) no Event of Default exists,

                           (v) such Borrower's property is free and clear of all
                  Liens other than Permitted Liens,

                           (vi) such  Borrower  has no  Indebtedness  except (A)
                  such Borrower's Obligations and (B) Subordinated Debt,

                           (vii)  all  balance   sheets,   all   statements   of
                  operations  and of changes in  financial  position,  and other
                  financial data which have been or shall hereafter be furnished
                  to  FINOVA  for the  purposes  of or in  connection  with this
                  Amendment  have been and will be prepared in  accordance  with
                  GAAP consistently  applied throughout the periods involved and
                  do and will  present  fairly the  financial  condition  of the
                  entities  involved as of the dates  thereof and the results of
                  their operations for the periods covered thereby, and

                           (viii) no  material  litigation  (including,  without
                  limitation,  derivative actions),  arbitrations,  governmental
                  investigation  or  proceeding  or inquiry  shall,  on the date
                  hereof,  be  pending  which was not  previously  disclosed  in
                  writing to FINOVA and no material  adverse  development  shall
                  have   occurred   in  any   litigation   (including,   without
                  limitation,   derivative  actions),  arbitration,   government
                  investigations,  or proceeding or inquiry previously disclosed
                  to FINOVA in writing.


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         6. Costs and Expenses. Borrowers agree to reimburse FINOVA for all fees
and expenses  incurred in the  preparation,  negotiation  and  execution of this
Amendment,  including,  without limitation,  the reasonable fees and expenses of
counsel for FINOVA.

         7. No Further Amendments;  Ratification of Liability. Except as amended
hereby,  the Loan Agreement and each of the other Loan Documents shall remain in
full force and effect in accordance with their respective  terms.  Each Borrower
hereby ratifies and confirms its  liabilities,  obligations and agreements under
the  Loan  Agreement  and the  other  Loan  Documents,  all as  amended  by this
Amendment,  and the Liens created thereby,  and acknowledges  that (i) it has no
defenses,  claims or set-offs to the enforcement by FINOVA of such  liabilities,
obligations and  agreements,  (ii) FINOVA has fully performed all obligations to
Borrowers  which it may have had or has on and as of the date  hereof  and (iii)
other than as specifically set forth herein,  FINOVA does not waive, diminish or
limit any term or condition  contained  in the Loan  Agreement or the other Loan
Documents. FINOVA's agreement to the terms of this Amendment shall not be deemed
to establish or create a custom or course of dealing among FINOVA and Borrowers.

         8.  Counterparts.  This  Amendment  may be  executed  in  one  or  more
counterparts,  each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.

         9. Further Assurances.  Each Borrower covenants and agrees that it will
at any time and from time to time do, execute,  acknowledge and deliver, or will
cause to be done, executed,  acknowledged and delivered,  all such further acts,
documents and  instruments  as reasonably  may be required by FINOVA in order to
effectuate fully the intent of this Amendment.

         10.  Governing  Law.  This  Amendment,   including  without  limitation
enforcement of the  obligations,  shall be  interpreted  in accordance  with the
internal  laws (and not the  conflict  of laws  rules)  of the State of  Arizona
governing contracts to be performed entirely within such state.

         11.  Severability.  If any term or provision  of this  Amendment or the
application  thereof to any party or  circumstance  shall be held to be invalid,
illegal or  unenforceable  in any respect by a court of competent  jurisdiction,
the validity,  legality and enforceability of the remaining terms and provisions
of this Amendment shall not in any way be affected or impaired thereby,  and the
affected term or provision shall be modified to the minimum extent  permitted by
law so as most fully to achieve the intention of this Amendment.

         12.  Captions.   The  captions  in  this  Amendment  are  inserted  for
convenience of reference only and in no way define,  describe or limit the scope
or intent of this Amendment or any of the provisions hereof.

         13. Successors.  This Amendment shall be binding upon each Borrower and
FINOVA and their respective  representatives,  successors and assigns, and shall
inure to the sole  benefit of each  Borrower  and  FINOVA  and their  respective
representatives, successors and assigns.

         14. Effective  Date. Upon execution by each of the parties hereto,  the
 amendments  herein shall be deemed to take effect as of March 31, 1999.

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         IN WITNESS  WHEREOF,  this Amendment has been executed and delivered by
each of the parties  hereto by a duly  authorized  officer of each such party on
the date first set forth above.

                    THE  LEATHER  FACTORY,  INC.,  a Delaware  corporation,  THE
                    LEATHER  FACTORY,  INC.,  a Texas  corporation,  THE LEATHER
                    FACTORY,  INC., an Arizona  corporation,  HI-LINE  LEATHER &
                    MANUFACTURING COMPANY, a California corporation, and ROBERTS
                    CUSHMAN & COMPANY, INC., a New York corporation

                    By:               /s/ Wray Thompson       
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                    Name:                 Wray Thompson         
                    ---------------------------------------------------         
                    Title:                President 
                    --------------------------------------------------- 

                    FINOVA CAPITAL CORPORATION, a Delaware corporation

                    By:               /s/ Kenneth Sepp   
                    --------------------------------------------------- 
                    Name:                 Kenneth Sepp         
                    ---------------------------------------------------         
                    Title:                Vice President    
                    --------------------------------------------------- 









                   






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                                  EXHIBIT 27.1