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The money the owner allows for FA signings is a bit of a mystery, but I do know that it is directly affected by both budget and cash - if you increase either by X dollars, you will have X dollars more for FA signings. If you're in negative territory now for FA money, you may have to increase one by several million before you start seeing results.
Your options as far as I know are:
1) Go into commissioner mode - you now have control of the team and the owner will approve all signings, although if you go overboard there will of course be financial repercussions at the end of the year.
2) Go into commissioner mode and in the financials screen click on 'edit financials' and raise the budget, then exit commissioner mode and try FA signing again. This may need to be repeated.
3) Raise your cash level by trading players or draft picks (if draft pick trading is enabled) for cash.
Hope that is helpful, I've had the same problem. If anyone knows the actual formula used to determine FA money available please post it!
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