Even a small/short barreled gun should be able to shoot good groups at 7 yds.
Not pointing fingers at the OP, just saying the short barrel thing is said to have more of a cause in the distance between the sights and peoples eyes rather than the barrel length. One of the reasons I spent (too much) money on that 2.0 M&P 9MM 5" was my wife's itty bitty Shield 9MM shot such nice groups for me. The darn dinky little shield shoots better groups than the much longer barreled full sized 9MM M&P.
Ammo can make a difference. The gun may not be capable of small groups. The shooter may need more range time and even someone/something to help improve their skills.
Red dots are nice. Not sure how one of the new Holosuns or RMR small sights would fit/look on a small SIG but it could help make you more consistent as the only alignment you need to worry about is putting the dot in the same place on the target. And, the red dots are adjustable, too. If the ammo you like hits low, adjust the elevation screw.
Good luck