Am I a Start-Up Business Owner? The Essential Truth

When it comes to applying for equipment financing or business loans, one of the most common questions we hear at Truecore Capital is: “Am I considered a start-up business owner?”

It’s a fair question – and an important one. In the Commercial lending world, being classified as a start-up vs. an established business can make a difference in financing options that are available to you. Unfortunately, many business owners misunderstand how this classification works – and as a result, they assume they’ll only qualify for higher rates or stricter requirements.

Let’s clear that up once and for all.

The Common Misconception: Two Years in Business = Established

In general, most lenders use time in business as a fast way to gauge the financial stability of the company. Traditionally, two years in business has been considered the threshold for moving from “start-up” to “established.”

That two-year mark signals a few things to lenders:
– The business has proved that it can generate consistent revenue.
– You have filed at least one full business tax return.
– You’ve built either a credit or payment history tied to the business name or EIN.

However, here’s where many applicants get tripped up – that two-year rule isn’t as rigid as it sounds.

If you just set up an LLC or incorporated your business and worked in the same field as a 1099 independent contractor, that self-employment experience can absolutely count toward your time in business.

The Consumer Financial Protection Bureau (CFPB) notes that lenders commonly use “time in business” information when evaluating credit applications and often distinguish between businesses that have been operating less than two years vs. two or more years. This measurement helps lenders assess risk but doesn’t necessarily reflect a borrower’s full experience.

How 1099 Experience Can Help You Qualify

Let’s say you’ve spent the past three years hauling freight under your own authority as a 1099 driver. A few months ago, you made the decision to formally establish your business and file for an LLC.

Technically, your LLC paperwork might say “established in 2025,” but in reality, you’ve been operating – and earning income – in the same line of work for years. That experience, revenue history, and tax documentation all demonstrate the same stability lenders look for in an established business.

At Truecore Capital, we can use those prior 1099 documents to bridge the gap between “new business” and “established operation.” By doing so, we an help qualified applicants gain access to:
– Larger approval amounts
– More flexible terms
– Access to more lender programs that are normally inaccessible to start-ups

In addition to providing more options for the business, this strategy also gives your business more credibility and flexibility when acquiring essential equipment.

What Lenders Look For Beyond the LLC Date

While every lender has its own guidelines, here are the most important factors that can help demonstrate your business is not a start-up – even if your LLC is new:

– Consistent 1099 Income: provide proof of two or more years of consistent income from self-employment in the same industry. Tax returns, 1099 forms, and deposit statements are key (although not all 3 documents are required). The Internal Revenue Service (IRS) defines an independent contractor as a self-employed individual whose earnings are subject to self-employment tax – meaning that income is recognized as legitimate business activity.

– Industry Continuity: Lenders love to see that your prior experience is directly related to your new business venture. For instance, a construction foreman starting their own contracting company or a driver becoming an owner-operator.

– Strong Credit & Payment History: Personal credit and trade references can help reinforce that you’re a low-risk borrower.

– Down Payment or Collateral (When Needed): Even a small down payment or pledging collateral can open doors to better terms/options.

By providing proof of your previous 1099 work. you help lenders see the full picture – and that’s often good enough to move you into the “established” category.

Real World Example

Imagine two applicants:
– Applicant A: Formed an LLC 6 months ago, no prior experience.
– Applicant B: Formed an LLC 6 months ago, but has 3 years of 1099 experience hauling loads and maintaining their own rig.

While both businesses are technically “6 months old” on paper, Applicant B’s history demonstrates financial consistency, industry experience, and a proven income stream. That gives lenders confidence – and results in better/additional financing options.

How Truecore Capital Can Help
At Turecore Capital, we specialize in helping small- and mid-sized business owners – from trucking to construction to agriculture – naviate the financing process with confidence.

We understand that the date on your LLC paperwork doesn’t tell your whole story. Even if your company is recently incorporated, our team takes the time to examine your entire professional history, including 1099 records, bank statements, and tax documents, in order to help you qualify for the best programs available.

Don’t let a technical label like “start-up” prevent you from securing the equipment you need to grow your business. If you’ve been working as an independent contractor, owner-operator, or self-employed professional, your experience matters – and it can make all the difference in how lenders view your application.

Ready to Start Your Journey?
Whether you’re looking to purchase a new or used semi-truck, a skid steer, or a tractor, our team is here to help structure a deal that fits your goals and cash-flow needs. To get the process started, feel free to give us a quick call at (805) 422-7342 or fill out a Quick Application today and one of our experienced reps will be in touch with you shortly!

Sources:
– Consumer Financial Protection Bureau, “Small Business Lending Rule – Small Entity Compliance Guide,” [https://files.consumerfinance.gov/f/documents/cfpb_small-business-lending-rule_small-entity-compliance-guide.pdf]
– Internal Revenue Service (IRS), “Independent Contractor Defined,” [https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-defined]