Scottish Youth Theatre (SYT) has an opportunity to secure future money from Creative Scotland under an alternative funding plan, it has emerged.
The theatre, whose alumni include stars such as Gerard Butler and Karen Gillan, last week announced it is to close after losing out in the latest round of regular funding from the arts body.
SYT, based in Glasgow, said it will be left with a gap of around a third of its required income and has no other realistic option but to cease trading on July 31 this year.
Janet Archer, the chief executive of Creative Scotland, said it was possible the theatre could make up the shortfall through project funding applications.
She told BBC Scotland she had a "good" telephone conversation with SYT chief executive Jacky Hardacre on Friday.
"We've been talking to Scottish Youth Theatre about other options in terms of Creative Scotland funding and will continue to do that," she told the Sunday Politics Scotland show.
"It's accepted that the regular funding decisions have been made so we're talking to them about project funding, which is a different funding programme that we run."
Creative Scotland last year helped more than 300 organisations through project funding, she said.
She said applications can be for up to £100,000 per project, or £150,000 with permission.
Organisations can apply for up to two years' funding and for different projects.
She said: "Not many, but some organisations have managed to work project funding in a way that helps them to be more flexible to respond to opportunities as they arise."
Questioned on whether the money could plug the SYT's £200,000 shortfall, she replied: "That's possible."
She said: "My staff will always say it's under huge pressure, so we're only able to fund one in three of the applications that come in.
"But there is a possibility that Scottish Youth Theatre could come into open project funding and be successful."
Asked why the theatre lost out on its regular funding, Ms Archer said the arts body received over 180 applications for a share of a £33 million cash pot, meaning "we weren't able to fund all of the applications that were put into us".
Ms Hardacre told the same programme she was working on a plan to win national company status for the organisation.
She said: "We're not looking for just a simple handout, we want to be strategic about this.
"We've still got a bit of a way to go to earn that title but we're absolutely up and ready for that.
"I just hope that there's enough of a conversation that can get us somewhere quickly because time is not on our side in this."
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