Gov. Mark Dayton's decision to deposit another $100 million in Minnesota's community banks is a sincere but ultimately symbolic gesture that will do little to spur new small business lending in the state.

Most of Minnesota's community banks don't lack the money to make loans. They lack the stomach. State investments in their certificates of deposit won't strengthen that intestinal fortitude.

It's a universally acknowledged truth that entrepreneurs always complain that bankers and investors are either too tightfisted or too stupid to recognize the brilliance of the opportunity before them. When 10 bankers say, "No," the problem is never the business plan. It's the bankers.

In reality, banks like to make loans, especially ones with a high probability of being repaid. That's how they make money. Sure, loan rates may be near historic lows, but the interest rates that banks have to pay depositors are even lower. The spread between the two will do more for a bank's bottom line than parking cash in Treasury bills.

Banks also are in much better financial condition to make loans now that the dark days of the 2008 financial crisis are receding into the horizon. Fewer vultures are congregating atop the time-and-temperature signs outside their branches, and the Friday evening seizures by federal regulators have become less frequent.

Assets, including customer deposits, are up at many banks, but loan volume remains weak. At state regulated banks (a group that excludes nationally chartered banks like Wells Fargo and U.S. Bank) loan volume has fallen about 1 percent during the past four quarters, according to data compiled by the Federal Reserve Bank of Minneapolis.

Why? One lending sector, commercial real estate, remains moribund and, given the calamity in that sector in recent years, virtually off limits.

Banks also have tightened their lending standards, either independently or at the prodding of regulators. Consequently, businesses that used to be considered creditworthy now find themselves on the outs.

After the willy-nilly lending pursued by many community banks in the 2000s, that may not be such a bad thing.

Still, some banks probably have gone too far in this regard, meaning the whining by business owners is not entirely unjustified, said Jeff Judy, a Bloomington bank consultant who specializes in commercial credit.

"It's gotten to the point where some banks won't do a loan unless it's guaranteed" by the Small Business Administration, Judy said.

That leaves big and small banks alike competing for the strongest credit customers, who remain leery about taking on debt. For them, unemployment remains too high and consumer demand too weak to risk financing an expansion.

In short, most of the people who want to borrow money are the ones bankers have no interest in lending to.

Dayton's new program isn't going to change that dynamic. It's not a venture fund for start-ups or a credit line for established small businesses. It's the expansion of an existing state investment program, explained Howard Bicker, executive director of the State Board of Investment.

Instead of investing a maximum of $750,000 in a bank CD, the State Board of Investment could now invest as much as $1.5 million in three- and six-month CDs at participating banks. All of the state funds will be federally insured, and none will be at risk.

Banks don't have to promise or prove that they are making more small business loans to boost their deposits, Bicker said, "but we hope they will."

Such hopes may not provide the incentive bankers require. • 612-673-1736