Requirements for Time Machine External HD?

I recently upgraded to the M2 Mini. Love it!! Would like to use Time Machine. I have a WD Passport 4Tb drive that I have used in the past with my old iMac. I recently erased the drive and plugged it in to the Mini, thinking I'd use it for Time Machine backups. When, I went to Time Machine to set it up, I got this message:

So, apparently, this HD is either not formatted properly or for some other reason is not appropriate for use with Time Machine. Thus, my question. What are the requirements for a HD to be used with TM? Is this simply a formatting issue?

Thank you!