ARTS companies last night expressed fears for their future after one of the most significant revamps of cultural funding in recent years.

Creative Scotland, the nation's main arts funding body, has reviewed and changed the funding basis of 75 companies and agencies across the country.

The companies, encompassing theatre, the visual arts, traditional music, dance and festivals, were informed late on Wednesday night they now fall into three categories and will be funded on a project-by-project basis, on a yearly basis, or as one of the body's longer-term Foundation Organisations.

Forty-nine companies, including notable names such as the CCA in Glasgow, NVA, The Common Guild, Vanishing Point, the Talbot Rice Gallery and Grid Iron, are now on project funding, a money pot which could support one project or up to two years' funding.

Twenty-two companies, including major festivals such as Celtic Connections, GI, the St Magnus Festival in Orkney, and the Edinburgh Fringe, are now on annual funding while three companies, the Highland Print Studio, Edinburgh Printmakers and Cumbernauld Theatre, have become new Foundation Organisations. One company is no longer making work.

A spokeswoman for the Sound festival, in north-east Scotland, which is on project funding, said they were "bewildered" by the decision.

"The investment we have benefited from in the past four years has given us the stability to develop creatively into one of the UK's leading new music festivals," she said.

"It is unclear as yet what any alternative funding from Creative Scotland will look like. If we have to apply for funding on a project by project basis, then it will be extremely difficult for us to build on our success."

Creative Scotland's finances alter significantly in the next three years, changes which, along with a shift in funding strategy, led to the moves.

In particular, the funds available from the Scottish Government will reduce as a proportion of the agency's total funding, falling by £2.1 million to £33.4m in 2014.

However, this decline comes alongside a sizeable increase in National Lottery funding from £18m to £32.3m, a pot which can be used to fund projects, but not for revenue funding of arts companies.

Creative Scotland also wants to set aside money, currently more than £3m, for its new "strategic commissioning" plans.

Organisations on project funding now need to consult Creative Scotland and apply for their funds, in time for the end of the current financial year.

Creative Scotland emphasised that project funding will not necessarily lead to a hand-to-mouth existence, as project funds could run from two months to three years.

Venu Dhupa, the director of creative development at Creative Scotland, said: "We must make sure these organisations make transitions from where they currently are, to bidding in for lottery resources, and the work they are doing is contiguous. We simply cannot have people falling down holes.

"There may be short gaps, but they must be able to pick up on the momentum and energy they have created – those are the issues and challenges we now need to address."

However, companies now removed from guaranteed revenue funding say they face an uncertain future.

Katrina Brown, the director of The Common Guild and the artistic director of the successful GI Festival of contemporary art, added: "For most people, the 49 companies now on project-based funding, it still remains completely unclear whether we will be able to run our offices, never mind our programmes, from next March."