I think of the two options you mentioned #1 seems to be better.
However this is a tricky situation and both of them seem to be trouble, it's just the matter of picking which one will be less troublesome.
Not sure about this, but is ACT offered in your country?
I would honestly suggest that you do either one of these -
1. Send SAT Score + Attach additional essay about the problem you faced in taking the SATs and how you tried your best.
2. Call the admissions office. Ask for the contact details of the regional officer for your area. And tell him your problem. Im guessing he'd know best. Tell him the whole situation - that you cant take it due to financials and ask for advice.
Hope it helps.
All the best