I'm sure you will get other replies but yes, grants are the source of much of the funding which eventually gets funneled to independents. You don't need non profit status yourself as an independent, but increasingly, independents have either started or joined non-profits to try to eke out a more reliable source of funding than just hoping someone else will get a grant and hire them. Non profit funding is (usually) a mix of grants, fees for services, individual contributions, and in some cases, sales.
One of the issues for independent folklorists in the last few years, has been the drop in both state and federal funding for folk arts (and for everything else)(and Amber Ridington may chime in on the situation in Canada) - so it's wise to have a portfolio of skills and experience in several areas. I've been hired in particular because of my training and experience as a classroom teacher and in creating curriculum and lesson plans. Others are being hired because of their expertise in video/audio documentation- would be great to hear from other indies on what has helped them get work.
The other thing you need to do is network! Go to AFS if you can, go to regional retreats, get to know the folklorists in the area you want to work in- and make sure they know about your skills. Try to get an internship or consider volunteering for a short time .
Hope this helps