Take a deep breath. Now another one. Sit down. Remember what Maurice said in "Out of Sight": You know, in a situation like this, there's a high potentiality for the common motherfucker to bitch out.

Two things you need to remember:

(1) Having competitors, even when they're better than you, is good. Competitors validate your space. Especially in B2B products. Businesses want multiple choices. A better-funded competitor is going to blaze a trail through the market for you. Even if they're the only name most people know, businesses will find you just by seeking out alternatives to them --- a lot of times, even if they like your competitor, they'll look for alternatives because they're required to solicit bids. And on a purely tactical level, competitors are a product management gift that keeps on giving: just watch what they do, and each time they do something new, you can choose to match them, outflank them, or ignore them for now.

(2) You have an enormous advantage over a funded competitor, because you don't answer to a board. You can price your products and devise a go-to-market strategy that doesn't have to make sense to a room full of small-time investment bankers. You can trail them, even miles behind them in the market, and still be viable. Not only that, but in some cases you can end up being more attractive for being small: acquirers may see you as an easy to way to buy functionality without paying a premium for a client base which they may already have ready to plug into your offering. (Cisco did this to my last company, buying lame also-ran fast-followers, twice).

You don't have to change anything. Just keep making smart, near-term business decisions. What happens with the new competitor may influence those decisions, but if they determine the decisions, you're doing something wrong. And applying for loans and going all-out for capital merely in response to a new entrant sounds wrong.

If you're lucky, you get to have a dogfight now. Have fun with it!