In the modern power system, Flexible Alternating Current Transmission System (FACTS) devices are widely used. An increased share of the distributed generation (DG) and the development of microgrids change the power flows in the existing distribution networks as well as a conventional power flow direction from the transmission to the distribution network level which may affect the overall stability aspects. The paper shows the FACTS devices’ implementation influence on the performance of the distribution network with integrated renewable energy sources (RES) observing the aspects of the oscillatory stability and the low-voltage motor starting. The FACTS devices, in particular the static var compensators (SVC), have been allocated according to a novel algorithm proposed in the paper. The algorithm uses an iterative process to determine an optimal location for implementation and rating power of SVC considering active power losses minimization, improvement of the voltage profile and maximizing return of investment (ROI) of FACTS devices. Novel constraints—transformer station construction constraint, SVC industrial nominal power value constraint and the constraint of distribution system operator (DSO) economic willingness to investment in the distribution network development are considered in the proposed algorithm. The analysis has been performed on 20 kV rural distribution network model in DIgSILENT PowerFactory software.