diff --git a/pkg/services/hcloud/server/server.go b/pkg/services/hcloud/server/server.go
index ea92954ea..dc3741480 100644
--- a/pkg/services/hcloud/server/server.go
+++ b/pkg/services/hcloud/server/server.go
@@ -59,7 +59,7 @@ const (
 
 var hcloudImageURLCommandDir = "/shared"
 
-var errServerCreateNotPossible = fmt.Errorf("server create not possible - need action")
+var errServerCreateNotPossible = errors.New("server create not possible - need action")
 
 // Service defines struct with machine scope to reconcile HCloudMachines.
 type Service struct {
@@ -251,13 +251,9 @@ func (s *Service) handleBootStateUnset(ctx context.Context) (reconcile.Result, e
 			)
 			return reconcile.Result{}, nil
 		}
-
 		if errors.Is(err, errServerCreateNotPossible) {
 			err = fmt.Errorf("createServerFromImageNameOrURL failed: %w", err)
 			s.scope.Error(err, "")
-			conditions.MarkFalse(hm, infrav1.ServerCreateSucceededCondition,
-				"ServerCreateNotPossible", clusterv1.ConditionSeverityWarning,
-				"%s", err.Error())
 			return reconcile.Result{RequeueAfter: 5 * time.Minute}, nil
 		}
 		return reconcile.Result{}, fmt.Errorf("failed to create server: %w", err)
diff --git a/pkg/services/hcloud/server/server_test.go b/pkg/services/hcloud/server/server_test.go
index 624c8d2a5..b9b6f8d69 100644
--- a/pkg/services/hcloud/server/server_test.go
+++ b/pkg/services/hcloud/server/server_test.go
@@ -1229,6 +1229,33 @@ var _ = Describe("Reconcile", func() {
 		Expect(isPresentAndFalseWithReason(service.scope.HCloudMachine, infrav1.HetznerAPIReachableCondition, infrav1.RateLimitExceededReason)).To(BeTrue())
 	})
 
+	It("requeues for 5 minutes when server creation is not possible while creating a server", func() {
+		By("setting the bootstrap data")
+		err = testEnv.Create(ctx, &corev1.Secret{
+			ObjectMeta: metav1.ObjectMeta{
+				Name:      "bootstrapsecret",
+				Namespace: testNs.Name,
+			},
+			Data: map[string][]byte{
+				"value": []byte("dummy-bootstrap-data"),
+			},
+		})
+		Expect(err).To(BeNil())
+
+		service.scope.Machine.Spec.Bootstrap.DataSecretName = ptr.To("bootstrapsecret")
+
+		By("ensuring that the mock hcloud client returns no server type")
+		hcloudClient.On("GetServerType", mock.Anything, mock.Anything).Return(nil, nil).Once()
+
+		By("calling reconcile")
+		res, err := service.Reconcile(ctx)
+		Expect(err).To(BeNil())
+		Expect(res).To(Equal(reconcile.Result{RequeueAfter: 5 * time.Minute}))
+
+		By("ensuring the server type not found condition is set")
+		Expect(isPresentAndFalseWithReason(service.scope.HCloudMachine, infrav1.ServerCreateSucceededCondition, infrav1.ServerTypeNotFoundReason)).To(BeTrue())
+	})
+
 	It("sets condition HCloudCredentialsInvalid when HCloud API returns 'unauthorized' error while finding server", func() {
 		By("setting the bootstrap data")
 		err = testEnv.Create(ctx, &corev1.Secret{
diff --git a/test/helpers/envtest.go b/test/helpers/envtest.go
index 048f79830..b9dc8841d 100644
--- a/test/helpers/envtest.go
+++ b/test/helpers/envtest.go
@@ -25,6 +25,7 @@ import (
 	"path"
 	"path/filepath"
 	goruntime "runtime"
+	"strings"
 	"time"
 
 	g "github.com/onsi/ginkgo/v2"
@@ -146,7 +147,7 @@ func NewTestEnvironment() *TestEnvironment {
 	initializeWebhookInEnvironment()
 
 	if _, err := env.Start(); err != nil {
-		panic(err)
+		panic(wrapEnvtestStartError(err))
 	}
 
 	logLevel := "info"
@@ -221,6 +222,24 @@ func NewTestEnvironment() *TestEnvironment {
 	}
 }
 
+func wrapEnvtestStartError(err error) error {
+	if err == nil {
+		return nil
+	}
+
+	// Check whether the error is about missing binaries in $PATH, for example:
+	//
+	// unable to start control plane itself: failed to start the controlplane.
+	// retried 5 times: exec: "etcd": executable file not found in $PATH"
+	errText := err.Error()
+	if !strings.Contains(errText, "$PATH") {
+		// This looks like another error, so do not add the hint.
+		return err
+	}
+
+	return fmt.Errorf("%w\nHint: set KUBEBUILDER_ASSETS=$PWD/hack/tools/bin/k8s/1.??.0-linux-amd64", err)
+}
+
 // StartManager starts the manager and sets a cancel function into the testEnv object.
 func (t *TestEnvironment) StartManager(ctx context.Context) error {
 	ctx, cancel := context.WithCancel(ctx)