Companies signed up for $7.7 billion in new loans, leases and lines of credit last month, down 6 percent from a year earlier. However, borrowing rose 20 percent from August.

"Uncertainty created by the inability of policy makers to come together to agree on sustained tax and spending policy is holding back the U.S. economy, and in particular, capital investment," ELFA Chief Executive William Sutton said in a statement.

Washington-based ELFA, a trade association that keeps track of economic activity for the $725 billion equipment finance sector, said credit approvals totaled 77.3 percent in September, down from 79.1 the previous month.

ELFA's leasing and finance index measures the volume of commercial equipment financed in the United States. It is designed to complement the U.S. Commerce Department's durable goods orders report, which it typically precedes by a few days.

ELFA's index is based on a survey of 25 members including Bank of America Corp (>> Bank of America Corp), BB&T Corp (>> BB&T Corporation), CIT Group Inc (>> CIT Group Inc.) and the financing affiliates or subsidiaries of Caterpillar Inc (>> Caterpillar Inc.), Deere & Co (>> Deere & Company)N, Dell Inc (>> Dell Inc.), Verizon Communications Inc (>> Verizon Communications Inc.), Siemens AG (>> Siemens AG), Canon Inc (>> CANON INC.) and Volvo AB (>> AB Volvo).

The Equipment Leasing & Finance Foundation, ELFA's non-profit affiliate, said on Monday its October confidence index fell to 54.0 from 61.3 in September.

A reading of above 50 indicates a positive outlook.

(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Don Sebastian)