setLoanItem() isn't a static method, it's an instance method, which means it belongs to a particular instance of that class rather than that class itself.
Essentially, you haven't specified what media object you want to call the method on, you've only specified the class name. There could be thousands of media objects and the compiler has no way of knowing what one you meant, so it generates an error accordingly.
You probably want to pass in a media object on which to call the method:
public void loanItem(Md m) {
m.setLI("Yes");
}