Hey,
There's a sword and armor piece you find in Lily's living room that will help you win the fight.
The armor is in the drawers, and the sword is in the bottom left box near the exit door.
No problem, yes you have to equip them and any other items you may loot in the future.
If you go to the menu, click equip and you can click optimize and it will auto equip what the game thinks is the best gear/weapons you have in your inventory.
Or you can equip each item for each slot manually through clicking equip.
Hope this helps.