I've just done the following on my Note 4 and it works......not sure if it will be the same on your Note 7:
1) Open S Note (close it altogether if it is already open and reopen it)
2) Confirm that the extension is loaded
a) Go to MORE in the upper right corner
b) Click More features
c) Confirm that the Extension Pack (first in the list) is installed - there should be a red "Installed" indicator under it if it is. If it is not installed, then install it.
d) Go back one screen to the opening S Note screen
3) On the opening S Note screen, click the "All" drop down in the upper left corner and then select "Notes" in the menu that appears.
4) Add a new note by clicking the pen on the lower right corner.
5) Remove the S Pen and select the pen input icon in the upper left corner (if it is not already selected).
6) Write some text on the screen.
7) Select the selection icon (the dashed cloud-looking figure in the middle of the top toolbar).
8) Select the text you just wrote - a context menu will then appear when you're done selecting.
9) On the context menu, select transform.
10) On the second context menu, select "Text".