<PAGE>
 
                                                                    EXHIBIT 10.1
 
                      SECOND AMENDMENT TO LOAN AGREEMENT


     THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and
entered into as of this 21st day of August, 1998, by and between METROTRANS
CORPORATION, a Georgia corporation, as borrower (the "Borrower"), and
NATIONSBANK, N.A., a national banking association, as lender (the "Lender").



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


     WHEREAS, the Borrower and the Lender are parties to that certain Loan
Agreement, dated as of September 5, 1997, as amended by First Amendment to Loan
Agreement dated as of May 18th, 1998 (as amended, the "Loan Agreement"),
pursuant to which the Lender extended certain financial accommodations to the
Borrower; and

     WHEREAS, the Borrower has requested, and the Lender has agreed, subject to
the terms hereof, to amend certain provisions of the Loan Agreement, to permit
the Borrower to incur $15,000,000 of subordinated debt; and

     NOW, THEREFORE, in consideration of the premises, the terms and conditions
contained herein, and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

     1. DEFINITIONS. All capitalized terms used herein and not expressly defined
herein shall have the same respective meanings given to such terms in the Loan
Agreement.

     2. AMENDMENTS TO ARTICLE 1.

        (a) Section 1.1 of the Loan Agreement is hereby amended by deleting the
definitions of "Leverage Ratio," "Maturity Date" and "Note" in their entirety
                --------------    -------------
and substituting in lieu thereof the following definitions to read as follows:


        "'Maturity Date' shall mean December 31, 2000 or such earlier date as
          -------------
     payment of the remaining outstanding principal amount of the Loans or of
     all remaining outstanding Obligations shall be due (whether by acceleration
     or otherwise)."

        "'Note' shall mean that certain promissory note dated as of August 21,
          ----
     1998 in the original principal amount of Twenty Million Dollars
     ($20,000,000.00) issued to the Lender by the Borrower, substantially in the
     form of Exhibit D attached hereto, and any other notes executed and
             ---------
     delivered by the Borrower to the Lender with respect to the Loan, and any
     amendments, renewals or extensions of the foregoing."



        "'Senior Leverage Ratio' shall mean, as of any date, the ratio of (a)
          ---------------------
     Senior Debt on such date to (b) EBITDA for the most recently completed four
     (4) fiscal quarter period."
<PAGE>
 
        (b) Section 1.1 of the Loan Agreement is hereby amended by adding the
following new definitions in appropriate alphabetical order:

              "'Mayflower" shall mean Mayflower Corporation plc or its
                ---------
              Affiliates.
              
              "Mayflower Purchase Agreement" shall mean that certain Agreement
               ----------------------------
     between Mayflower, the Borrower, D. Michael Walden, Terri B. Hobbs,
     Randolph B. Stanley and M. Earl Meck.


              "Mayflower Subordinated Loan Documents" shall mean that certain
               -------------------------------------
     Loan Agreement dated as of August 21, 1998 between the Borrower and
     Mayflower and any notes, security agreements, deeds to secure debt, loan
     agreements, or other instruments previously, simultaneously or hereafter
     executed and delivered by the Borrower to Mayflower.


              "Mayflower Subordinated Debt" shall mean the unsecured
               ---------------------------
     subordinated revolving credit loans in a maximum principal amount not to
     exceed $15,000,000 made Mayflower to the Borrower pursuant to the Mayflower
     Subordinated Loan Documents.


              "Senior Debt" shall mean, with respect to the Borrower and the
               -----------
     Subsidiaries on a consolidated basis as of any calculation date, the sum,
     without duplication, of Indebtedness for Money Borrowed other than
     Subordinated Debt, all as determined in accordance with GAAP.


              "Subordinated Debt" shall mean, for the Borrower and the
               -----------------
     Subsidiaries on a consolidated basis as of any calculation date, all
     Indebtedness for Money Borrowed permitted hereunder which is expressly
     subordinated by its terms to the Obligations pursuant to subordination
     terms satisfactory to the Lender, including, without limitation, the
     Mayflower Subordinated Debt.



              "Total Leverage Ratio" shall mean, as of any date, the ratio of
               --------------------
     (a) Indebtedness for Money Borrowed with respect to the Borrower and the
     Subsidiaries on a consolidated basis on such date to (b) EBITDA for the
     most recently completed four (4) fiscal quarter period.



        (c) The Loan Agreement is hereby further amended by deleting all
references to "Leverage Ratio" wherever they appear and substituting in lieu
thereof "Senior Leverage Leverage."

     3. AMENDMENTS TO ARTICLE 7.

        (a) The Loan Agreement is hereby further amended by deleting Section 7.3
in its entirety and substituting in lieu thereof the following to read as
follows:

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<PAGE>
 
        "Section 7.3 Amendment and Waiver. The Borrower shall not, and shall
                      --------------------
     not permit any of its Subsidiaries to, enter into any amendment of, or
     agree to or accept or consent to any waiver of any of the material
     provisions of its articles or certificate of incorporation, by-laws or
     partnership agreement, as appropriate, which amendment or waiver is adverse
     to the interest of the Lender, or any amendment of the Mayflower
     Subordinated Loan Documents, the Mayflower Purchase Agreement, or any other
     document relating to any Subordinated Debt."


        (a) The Loan Agreement is hereby further amended by deleting Section
7.9 in its entirety and substituting in lieu thereof the following to read as
follows:


        "Section 7.9 Senior Leverage Ratio. As of the end of any fiscal
                     ---------------------
     quarter, the Borrower shall not permit the Senior Leverage Ratio to exceed
     the ratios set forth below during the periods indicated:

              Period                          Senior Leverage Ratio
              ------                          ---------------------

              March 31, 1998 through                 4.25:1.0
              September 30, 1998              
                                              
              October 1, 1998 through                3.75:1.0
              December 31, 1998               
                                              
              January 1, 1999 and thereafter         2.50:1.0"


        (b) The Loan Agreement is hereby further amended by adding a new
Section 7.15 to read as follows:


        "Section 7.15 Total Leverage Ratio. As of the end of any fiscal
                       --------------------
     quarter, the Borrower shall not permit the Total Leverage Ratio to exceed
     the ratios to be mutually agreed upon by the Borrower and the Lender on or
     before September 15, 1998."

     4. AMENDMENT TO ARTICLE 8. The Loan Agreement is hereby further amended by
deleting Section 8.1(k) in its entirety and substituting in lieu thereof the
following to read as follows:


        "(k) There shall occur (i) any default under any other document,
     instrument or agreement relating to any Indebtedness of the Borrower or any
     of the Borrower's Subsidiaries having an aggregate principal amount
     exceeding $500,000; or (ii) any event which directly or indirectly causes
     the Borrower or any of its Subsidiaries to be required to offer to prepay
     any Indebtedness or which directly or indirectly gives any holder of any
     Indebtedness of the Borrower or any of its Subsidiaries the right to
     require the Borrower or any of its Subsidiaries to prepay any such
     Indebtedness under any other document, instrument or agreement relating to
     any Indebtedness of the Borrower or any 

                                       3
<PAGE>
 
     of the Borrower's Subsidiaries having an aggregate principal amount
     exceeding $500,000; or (iii) any default under any Interest Rate Hedge
     Agreement having a notional principal amount of $250,000 or more; or (iv)
     any default under any of the Mayflower Subordinated Loan Documents, the
     Mayflower Purchase Agreement or any other document relating to Subordinated
     Debt; or"


     5. EXHIBIT. The Loan Agreement is further amended by deleting Exhibit D in
its entirety and substituting in lieu thereof Exhibit D attached hereto.
                                              ---------

     6. CONSENT.  Subject to the terms and conditions hereof, the Lender hereby
consents to the Mayflower Subordinated Debt, the Mayflower Purchase Agreement,
the Mayflower Subordinated Loan Documents and the transactions contemplated by
all of the foregoing (collectively, the "Mayflower Transactions").  On or prior
to consummation of the Mayflower Transactions, the Borrower shall provide to the
Lender form and substance satisfactory to the Lender (i) certification to the
Lender of the Borrower's compliance with Sections 7.9, 7.10, 7.11, 7.12 and 7.14
of the Loan Agreement both before and after giving effect to the Mayflower
Transactions; (ii) pro forma projections both before and after giving effect to
the Mayflower Transactions; (iii) certification to the Lender that a Default
does not exist and will not be caused by the Mayflower Transactions, (iv)
evidence that the documentation evidencing the Mayflower Transactions shall be
on substantially the same terms and conditions set forth in the drafts reviewed
by the Lender on August 20, 1998, (v) execution and delivery of the
Subordination Agreement dated as of even date herewith (the "Subordination
Agreement") and (vi) prior to any funding of the Mayflower Subordinated Debt, an
opinion of counsel as to the due authorization, execution and delivery by
Mayflower of the Subordination Agreement.


     7. REPRESENTATIONS AND WARRANTIES.  The Borrower hereby represents and
warrants to and in favor of the Lender as follows:


        (a) Each representation and warranty set forth in Article 4 of the Loan
     Agreement, as amended hereby, is hereby restated and affirmed as true and
     correct in all material respects as of the date hereof, except to the
     extent previously fulfilled in accordance with the terms of the Loan
     Agreement, as amended hereby, and to the extent relating specifically to
     the Agreement Date or otherwise inapplicable;

        (b) The Borrower has the corporate power and authority (i) to enter
     into this Amendment, and (ii) to do all acts and things as are required or
     contemplated hereunder to be done, observed and performed by it;

        (c) This Amendment has been duly authorized, validly executed and
     delivered by one or more Authorized Signatories of the Borrower, and
     constitutes the legal, valid and binding obligations of the Borrower,
     enforceable against the Borrower in accordance with its terms, subject, as
     to enforcement of remedies, to the following qualifications: (i) an order
     of specific performance and an injunction are discretionary remedies and,
     in particular, may not be available where damages are considered an
     adequate remedy at law, and (ii) enforcement may be 

                                       4
<PAGE>
 
     limited by bankruptcy, insolvency, liquidation, reorganization,
     reconstruction and other similar laws affecting enforcement of creditors'
     rights generally (insofar as any such law relates to the bankruptcy,
     insolvency or similar event of the Borrower); and

        (d) The execution and delivery of this Amendment and performance by the
     Borrower under the Loan Agreement, as amended hereby, does not and will not
     require the consent or approval of any regulatory authority or governmental
     authority or agency having jurisdiction over the Borrower which has not
     already been obtained, nor be in contravention of or in conflict with the
     Certificate of Incorporation or By-Laws of the Borrower, or any provision
     of any statute, judgment, order, indenture, instrument, agreement, or
     undertaking, to which the Borrower is party or by which the Borrower's
     assets or properties are bound.

     8. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. The effectiveness of
this Amendment is subject to:



        (a) all of the representations and warranties of the Borrower under
     Section 7 hereof which are made as of the date hereof, shall be true and
     correct in all material respects;


        (b) receipt by the Lender of a certificate of the chief executive
     officer of the Borrower certifying that no Default exists both before and
     after giving effect to this Amendment;


        (c) receipt by the Lender of a the duly executed Note, substantially in
     the form of Exhibit D attached hereto; and
                 ---------

        (d)  receipt of any other documents or instruments that the Lender may
     reasonably request, certified by an officer of the Borrower if so
     requested.


     9. EFFECT OF AMENDMENT; NO NOVATION. Except as expressly set forth herein,
the Loan Agreement shall remain in full force and effect and shall constitute
the legal, valid, binding and enforceable obligation of Borrower to the Lenders,
and Borrower hereby restates, ratifies and reaffirms each and every term and
condition set forth in the Loan Agreement, as amended hereby. The terms of this
Amendment are not intended to and do not serve as a novation as to the Loan
Agreement or the Notes or the indebtedness evidenced thereby. The parties hereto
expressly do not intend to extinguish any debt or security interest created
pursuant to the Loan Agreement or any document executed in connection therewith.
Instead it is the express intention to affirm the Loan Agreement and the
security created thereby.


     10. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which, when so executed and delivered, shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.

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<PAGE>
 
     11. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure
to the benefit of the successors and permitted assigns of the parties hereto.


     12. GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.


     12. MEDIATION.  The Lender and Borrower agree that any and all disputes
arising out of or related to the execution of this Amendment, or the performance
thereunder shall be submitted to non-binding mediation.  The cost of the
mediation is to be shared equally by the Lender and Borrower.  The parties
further agree as follows:

         (a)  They each will make a good faith effort to resolve any and all
              disputes pursuant to the mediation provision.


         (b)  They each will have parties present at the mediation session who
              have authority to resolve any pending disputes between the
              parties.


         (c)  That they will devote and set aside whatever time is needed to
              seek a resolution of any disputes between the parties.



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                                       6
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have executed this Amendment under
seal as of the day and year first above written.



BORROWER:                          METROTRANS CORPORATION



                                   By: /s/ D. Michael Walden 
                                       ____________________________________
                                       D. Michael Walden
                                       Chairman and Chief Executive Officer

                                            [CORPORATE SEAL]




LENDER:                            NATIONSBANK, N.A.



                                   By: /s/ Scot Turner
                                       ---------------------------------
                                       Scot Turner
                                       Assistant Vice President

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