Founding of new engineering laboratories requires large funding. Small liberal arts teaching universities, usually have limited funds particularly for engineering programs. This article details how a thermal engineering faculty member founded and developed a thermal engineering laboratory, in a small liberal arts university. Over the years the faculty member used the students' laboratory fees that varied from $300 to less than $1000 a year for small projects involving undergraduate students. Also, that faculty wrote and acquired numerous micro grants for equipment, instruments, and software. These micro grants ranged from $500 to $25,000. Creative methods were used to create unique hands-on learning opportunities for undergraduate mechanical engineering students. The undergraduate senior students designed, manufactured, assembled, and built unique thermal engineering experiments, with instruction and advising from the author. These activities met numerous of ABET criteria for accrediting undergraduate engineering programs. The projects that were designed and built by the senior mechanical engineering students were used in educating the following cohorts of mechanical engineering students. Many of these thermal projects were published in refereed journals and conferences. The undergraduate students who were involved in these projects ended up being co-authors for the work they were involved with. The total number of publications involving undergraduate students so far is eight refereed articles published in refereed journals and refereed conferences. In addition undergraduate students were co-authors in a poster session. This article details the projects, and the progress of developing the laboratory over sixteen years. Also, the author discusses the environment and settings that help creative development and founding a laboratory, with limited budget, in small universities.